What is a Preferred-Provider Organization or PPO?

When you are looking for a health insurance plan, especially for the first time, it can be a daunting task to decide what kind of medical plan to purchase.  With so many benefits and networks floating out there, it can be confusing to know which kind of plan to enroll in.  One type of medical insurance arrangement is called a preferred-provider organization, or PPO.

The Outline of a Preferred-Provider Organization

A PPO is a group of doctors, hospitals, and other health care providers that contract and form a network with an insurance company (or a third party administrator in the case of an employer self-funded plan) to offer health care services at a reduced rate.

With a PPO plan, an insurance plan subscriber has less out of pocket expense by using a provider in the PPO network.  The providers must accept as payment the contractually agreed-upon fee for the service(s) they provide.  This means they cannot bill the patient later for the difference between the contracted rate and the rate they usually charge for their services.  This is called balance billing and is not allowed when a patient sees a network provider.

When a subscriber goes outside of the preferred-provider organization, the providers usually still receive an amount from the insurance company less than what they bill.  However, the providers are free to balance bill the patient for the difference between what they were paid and what they charge.

It is extremely beneficial for a patient to visit an in-network physician or hospital when needing medical services, whether it be an office visit for a cold or for major surgery.  Not only does it reduce the out of pocket expenses of the plan subscriber, but it also keeps costs down for the insurance company, which in turn results in lower premiums in the future.

Can I See Any Doctor I Want?

Yes, in contrast to an HMO, you are free to see any doctor you want, in or out of network, without a referral from your primary care physician.

Why Don’t All Providers Join a Network?

Not all providers choose to join a preferred-provider organization.  Providers that do not join have various reasons, but they all have to choose the best business model for their practice.  Is it better to be in a network with reduced fees but more patients, or be in out of a network where they may not attract as many patients but they are free to charge whatever they want.

Why Isn’t My Doctor in My PPO Network Anymore?

There could be two main reasons that your doctor is not in your network anymore.

First, it could be that the provider’s contract expired and was not renewed.  Either the practice and the insurance company could not reach an agreement or the physician just decided not to be in a network anymore.

Or, it could be that you switched insurance companies.  Not all doctors are in every network.  Maybe he or she can reach an agreement with one insurance company but not another.  It is up to the doctor to decide which network works best, and it is up to the insurance company to decide which doctors they want in their preferred-provider organization.

How To Decide if a Preferred-Provider Organization is Right for You

If you are trying to decide if a PPO is right for you, you’ll need to compare the cost of the monthly premium, plan design features, and contracted providers with other types of plans.  If your doctors are in network, a preferred-provider organization is a good option for your health insurance needs.

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