PPO is short for preferred provider organization. It’s a health insurance option that offers you medical access to a select group of healthcare providers who have negotiated special rates with your health insurance company. Along with HMO plans, PPO health insurance is one of the most commonly-purchased types of medical coverage. It’s important to know how PPO insurance works before you sign up for a plan so you can make the most of the healthcare available to you.
How does PPO insurance work?
As mentioned, a PPO is made up of a network of “preferred” healthcare providers including doctors and hospitals. They’ve pre-negotiated rates with your health insurance carrier to provide more affordable care. As long as you stay within your PPO insurance’s network for services, your out-of-pocket costs will be less. You could always go “out-of-network” for care but be prepared to pay more.
In addition to the network of providers, a PPO insurance plan comes with a deductible. The deductible is the dollar amount you’ll need to spend first before your health insurance company pays for the rest of your medical services. Like other types of insurance, the higher the deductible, the lower your monthly premiums will be.
If your PPO health plan comes with a $1,500 annual deductible, you’ll need to pay for the first $1,500 in medical bills. Say you broke your ankle and the bill is $1,100. You’ll need to pay the full bill out of pocket to meet the $1,500 deductible. If you need additional medical care within the same year, you’ll only need to pay the remaining $400 of your deductible. Once you’ve met your deductible of $1,500, your insurance provider covers the rest. Depending on the plan you choose, you may need to pay coinsurance or a copayment for the remainder of the year, such as $20 per doctor’s visit.
HMO vs. PPO
Another way to understand PPO insurance is to compare it to a different type of popular health insurance — an HMO (health maintenance organization). HMO premiums are often lower than a PPO’s and there are usually no copays or deductibles. However, an HMO strictly limits you to a certain team or network of providers and facilities. An HMO can even limit the number of tests and treatments you receive to control costs.
Unlike a PPO that allows you to get treatment in and out of the network without prior approval, HMO patients must stay within the network and follow the recommendations made by the primary care physician (PCP). In an HMO plan, the PCP will be your main point of contact for most of your medical needs, essentially managing all your care. Primary care physicians ultimately make all the decisions about your health such as what type of treatment you’ll need and if you’re eligible for a referral to a specialist.
PPO insurance pros and cons
Weigh the benefits and drawbacks of PPO health insurance:
PPO insurance pros
- The flexibility to choose your own specialist or a particular facility — even if it’s outside of the network
- No referral from a primary care physician is required to visit a specialist
- In-network providers typically charge less
- Your carrier must pay for preventative care visits — even if you haven’t met your policy’s deductible
PPO insurance cons
- Premiums are typically higher than an HMO plan
- PPO plans typically come with a deductible that needs to be met before your health insurance company begins to pay for your treatments and services
- Going to a hospital or healthcare provider outside of the network can be expensive
Is PPO right for you?
Although PPO insurance limits your healthcare options in some ways, it’s a flexible type of medical coverage. PPO health insurance holders can seek treatment from any doctor or facility without the need for a referral from a primary physician first. This means that someone could schedule a visit with a cardiologist without having to go to a primary doctor for approval first.
You could even go outside of the network if there’s a particular doctor or medical center you prefer. However, your out-of-pocket costs will likely be higher if you visit a non-network provider. If you’re comfortable advocating for yourself and making your own medical decisions, a PPO may be right for you. Especially if you can afford the upfront expenses of higher premiums and a deductible.