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A preferred provider organization plan (PPO) consists of a network of doctors, hospitals and other medical providers who contract with your insurance company to provide services to you at a lower cost. While you can go to medical providers outside this network, you’ll pay more for those services.1
What You Need to Know
Using in-network providers will save you money.
You don’t need referrals to see specialists.
You can seek services from medical providers outside the network, but your costs will be higher.
How Does a Preferred Provider Organization Plan Work?
With a PPO plan, insurers negotiate fees with providers to provide services to their members, or subscribers, at reduced rates. These providers are considered “in network.” You can use providers who are out of network, but you’ll pay higher costs based on a schedule of fees designated by the insurance company. Because you have the option to choose providers at any time, you’re not required to choose a primary care doctor. You’re also not required to get a referral when you need to see a specialist. When seeing a medical provider, you likely will pay a copayment per visit. In some cases, you may have to meet your annual deductible before your PPO insurance will pay on your claim.
What Are the Benefits of a Preferred Provider Organization Plan?
The primary benefit of PPO health insurance is that you can choose doctors and providers in or out of network. If you love your doctor but they leave your PPO network, you can continue to see them anyway if you’re willing to pay the increased costs. If you’re traveling and need to see a doctor, it can be easy to find an in-network doctor for your care.
In addition, if you need to see a specialist such as a dermatologist, you won’t need to go to a primary care physician first for a referral.
What’s a PPO?
A PPO plan offers flexibility, so you can get covered medical care even when you’re traveling.
What Are the Drawbacks of a Preferred Provider Organization Plan?
While your costs will be lower from in-network providers, you’ll pay higher premium rates for PPO health insurance. You’ll also likely be required to pay a copayment or coinsurance as part of your claim. With some plans, you may have to pay your annual deductible before your PPO insurance starts to pay claims.
If you see an out-of-network provider, not only will you pay higher rates for services but you also may have to pay upfront and file a claim with your PPO insurance for reimbursement. This could be costly, and you might not get fully reimbursed.
How Does a PPO Plan Differ from an HMO Plan?
Similar to a PPO plan, a health maintenance plan (HMO) also operates with its own network of medical providers. With an HMO plan, you’ll typically pay lower premiums and reduced out-of-pocket expenses. However, you’ll likely be required to choose a primary care physician. If you need to see a specialist, you’ll need to see your primary care physician to get a referral to an in-network specialist. When seeing in-network providers, those providers will file your claim on your behalf for payment, so you don’t have to deal with it. Unless you have an emergency, you won’t get any coverage benefits if you see out-of-network providers.2
How Does a PPO Plan Differ from a POS Plan?
Like a PPO plan, a point of service (POS) plan offers its own network of medical providers, which will provide services at a reduced cost. However, you’re required to have a primary care physician, who will provide any referrals when you need to see a specialist.3 If you want to see a provider outside the network, you can do so at a higher cost.
How Does a PPO Plan Differ from an EPO Plan?
Similar to an HMO, an exclusive provider organization (EPO) plan only covers your medical services if you see providers within the plan’s network. If you see out-of-network providers, you’ll have to pay for those expenses yourself. The exception is emergency treatment, which is covered by your plan.4 However, like a PPO plan, you can see a specialist without a referral.
Out of Network Costs
If you go out of network, you might have to pay upfront and file a claim to get reimbursed later.
How Much Does a Preferred Provider Organization Plan Cost?
Your premium rates for PPO health insurance vary based on factors such as gender, age and medical history as well as the amount of your annual deductible. PPO plan premiums tend to cost more than other network plans. That’s generally balanced out by the lower rates you’ll pay if you stay in-network.
How Common Are Preferred Provider Organization Plans?
PPO insurance plans continue to be the most common plan type for health insurance. In fact, according to the Kaiser Family Foundation, 44% of covered workers enrolled in a PPO plan in 2019. Only 19% enrolled in an HMO, with 7% enrolled in a POS plan.5
Is a PPO Plan Right for Me?
PPO insurance is a good choice if you seek flexibility in your medical care and can afford to pay for it. If you want to choose the doctors you see, the hospitals you visit and other medical services, a PPO plan allows you to do so. Even services from out-of-network providers will be partially covered, although you’ll pay higher rates.
Next Steps
Not sure whether a PPO plan is the right choice for you? Follow these steps to get more information:
- Check that your medical providers are in the plan’s network.
- Get the details on premium rates, copayments, coinsurance and deductibles to make sure the plan fits your budget.
- Shop around so you can compare costs and benefits.
Whatever health plan you choose, make sure it offers the coverage you need at the price you can afford.
