What Is A Preferred Provider Organization (PPO)?
Author: Brad Stroh

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.


About The Author: Brad Stroh is currently co-CEO of Freedom
Financial Network and http://www.Bills.com. If you would like
more of Brad's http://www.Bills.com/sitemap/, please visit the
Bills.com information on http://www.Bills.com/healthinsurance/