A Preferred Provider Organization (also known as a PPO) is a managed care system that offers members health benefits and medical coverage based on a specific structure and network of medical professionals and facilities. PPOs are commonly sponsored by employers or insurance companies and help subsidize member medical costs. All doctors, hospitals, and health care providers involved in the network are selected by the preferred provider organization to provide medical assistance and health care coverage to its members. PPOs encourage members to utilize the doctors and hospitals within the PPO network but do allow members to visit out-of-network medical services providers. PPOs cover more of your medical costs if you visit an in-network provider. However, if a member visits a doctor or medical facility that is not within the PPO network, he/she is not covered at the level the member would be if he/she visited an in-network provider.
The member costs involved in a Preferred Provider Organization are specific to the member’s medical needs. Unlike an HMO where members pay a monthly fee for coverage, PPO members pay for their medical coverage based on the individual medical services used. But like an HMO, PPO members are often required pay a co-payment. A co-payment is an amount paid at the time of treatment to offset a portion of the medical costs. The amount of the co-pay varies depending on the specific medical treatment. Medical office visits have a different co-payment rate than prescriptions and more involved medical treatments.
In addition to a co-payment, and unlike an HMO, PPO members may be required to meet a deductible. A deductible is a dollar amount the Preferred Provider Organization requires a member to pay out-of-pocket before the member can begin to be reimbursed for his/her medical expenses. The deductible amount is normally an annual sum. If within six months of a year a member pays enough out-of-pocket expenses that equate the deductible amount, the PPO sponsor will start reimbursing the member for future medical expenses. However, if within a year, the deductible amount is not met, the out-of-pocket expenses do not carry over into the next year. The member’s out-of-pocket expenditure amount is set back to zero and the member must start over at the beginning of each year. However, some Preferred Provider Organizations have exceptions and offer carry-over deductible features.
Why a Preferred Provider Organization?
Preferred Provider Organizations offer more freedom and choices than other managed care insurance systems. Even if members go out-of-network for their medical needs, they are still covered to a certain degree. HMOs, for example, do not cover members if they go outside of the HMO network of providers. At least with a PPO, members get some coverage. Also with a Preferred Provider Organization, there is no need to establish and then have all medical treatment approved by a primary care physician (also known as a PCP). HMO plans also require members to select a physician as there primary care physician (PCP). This physician is the member’s primary care giver regarding all health-related issues and must sign off/refer members to other physicians if a specialist is needed. This limits the freedom a member has within the HMO network to visit an in-network doctor.
Why Not a Preferred Provider Organization?
Preferred Provider Organizations can be more costly to plan members. Since PPOs involve a deductible, PPO members often pay more out-of-pocket expenses for their coverage, depending on the specific medical services a member needs throughout the year.
Also, even though members have the freedom to visit an out-of-network provider, the cost to do so will most-likely be significant. Preferred Provider Organizations strongly recommend members to use in-network physicians and hospitals. To strengthen their recommendation, PPOs often pay noticeably less for out-of-network care than they do for in-network coverage.
A Preferred Provider Organization is a beneficial health plan for those seeking a wide range of medical coverage possibility. PPOs cover members even when they go out-of-network for their medical needs. However, PPO members do have added costs to going out of the PPO network for medical care.
Before you decide on a Preferred Provider Organization, read all the facts. Base you decision on your typical medical needs, your budget, and whether or not a PPO will be able to provide you with the medical care you need for the funds you have available for medical coverage.