Preferred Provider Organization (PPO)

Preferred Provider Organization (PPO)

What is a Preferred Provider Organization (PPO)?

Preferred Provider Organization (PPO) is a healthcare arrangement in which medical professionals and facilities provide services to subscribed customers at reduced rates. PPO medical and healthcare providers are referred to as preferred providers;

KEY TAKEAWAYS

  • PPO medical and healthcare providers are referred to as preferred providers;
  • Choosing between a PPO and an HMO often involves weighing a person’s desire for easier access to doctors and services against the cost of the plan.
  • PPO plans have more coverage and offer more scope than HMO plans, but they cost more.

How a Preferred Provider Organization (PPO) Works

Most health insurance plans go through a Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO). A PPO is a managed care organization that consists of medical professionals and facilities, such as primary and specialist physicians, hospitals, and other medical professionals. These professionals contract with insurance providers to provide their services to policyholders at an agreed discounted rate. In exchange for lower rates, the insurance company pays the PPO for access to the provider’s network.

Providers and insurance companies negotiate fees and schedules for services. PPO participants are free to use the services of any provider in their network. Out-of-network medical care is available, but it costs more for the insured. A reasonable and customary fee schedule for out-of-network claims. If these claims exceed the reasonable and customary cost of services provided, insurance may not apply, or, most often, the excess cost will be the responsibility of the patient. PPO subscribers typically pay a co-pay per supplier visit, or they must meet a deductible before an insurance company can cover or pay a claim.

PPO plans tend to charge higher premiums because they are more expensive to administer. However, they offer more flexibility than other plans. The PPO network is large, with suppliers in many cities and states. The flexibility to choose a provider or visit a provider in an emergency provides value to participants.

PPO vs HMO

Unlike PPOs, HMO plans require participants to obtain health care services from a designated provider, the primary care physician who coordinates the insured’s care. Both plans allow the insured to seek skilled care. However, under the Health Management Organization’s plan, the designated primary care physician must provide a referral to the specialist.

PPO plans charge higher premiums than HMOs because PPOs offer convenience, accessibility, and freedom, such as a wider choice of hospitals and doctors. Plans with minimum/minimum out-of-pocket costs, such as those with low deductibles and low co-pays, have higher premiums. Premium costs rise as insurers absorb more of the associated costs, with lower premium alternatives translating into higher out-of-pocket costs for the insured and lower costs for the insurer.

Some participants support HMO plans because of their affordability, although the services and freedoms typically associated with PPO plans are often limited.

PPO plans are also more comprehensive in terms of coverage, including many services that other managed care plans may exclude, or for which they will charge an additional premium.

In the past, PPO plans were the preferred choice for employer group participants. Today, however, participants want more options for managing healthcare. Therefore, many groups also offer HMO plans. Because HMO premiums are cheaper, some participants support HMO plans because they can afford them, although the services and freedoms typically associated with PPO plans are often limited.

Preferred Provider Organization (PPO)

What is a Preferred Provider Organization (PPO)?

Preferred Provider Organization (PPO) is a healthcare arrangement in which medical professionals and facilities provide services to subscribed customers at reduced rates. PPO medical and healthcare providers are referred to as preferred providers;

KEY TAKEAWAYS

  • PPO medical and healthcare providers are referred to as preferred providers;
  • Choosing between a PPO and an HMO often involves weighing a person’s desire for easier access to doctors and services against the cost of the plan.
  • PPO plans have more coverage and offer more scope than HMO plans, but they cost more.

How a Preferred Provider Organization (PPO) Works

Most health insurance plans go through a Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO). A PPO is a managed care organization that consists of medical professionals and facilities, such as primary and specialist physicians, hospitals, and other medical professionals. These professionals contract with insurance providers to provide their services to policyholders at an agreed discounted rate. In exchange for lower rates, the insurance company pays the PPO for access to the provider’s network.

Providers and insurance companies negotiate fees and schedules for services. PPO participants are free to use the services of any provider in their network. Out-of-network medical care is available, but it costs more for the insured. A reasonable and customary fee schedule for out-of-network claims. If these claims exceed the reasonable and customary cost of services provided, insurance may not apply, or, most often, the excess cost will be the responsibility of the patient. PPO subscribers typically pay a co-pay per supplier visit, or they must meet a deductible before an insurance company can cover or pay a claim.

PPO plans tend to charge higher premiums because they are more expensive to administer. However, they offer more flexibility than other plans. The PPO network is large, with suppliers in many cities and states. The flexibility to choose a provider or visit a provider in an emergency provides value to participants.

PPO vs HMO

Unlike PPOs, HMO plans require participants to obtain health care services from a designated provider, the primary care physician who coordinates the insured’s care. Both plans allow the insured to seek skilled care. However, under the Health Management Organization’s plan, the designated primary care physician must provide a referral to the specialist.

PPO plans charge higher premiums than HMOs because PPOs offer convenience, accessibility, and freedom, such as a wider choice of hospitals and doctors. Plans with minimum/minimum out-of-pocket costs, such as those with low deductibles and low co-pays, have higher premiums. Premium costs rise as insurers absorb more of the associated costs, with lower premium alternatives translating into higher out-of-pocket costs for the insured and lower costs for the insurer.

Some participants support HMO plans because of their affordability, although the services and freedoms typically associated with PPO plans are often limited.

PPO plans are also more comprehensive in terms of coverage, including many services that other managed care plans may exclude, or for which they will charge an additional premium.

In the past, PPO plans were the preferred choice for employer group participants. Today, however, participants want more options for managing healthcare. Therefore, many groups also offer HMO plans. Because HMO premiums are cheaper, some participants support HMO plans because they can afford them, although the services and freedoms typically associated with PPO plans are often limited.

By aamritri

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