When selecting different healthcare plans, a standard option is a Preferred Provider Organization plan or PPO. This managed care health insurance plan is designed to give you the best coverage when you use in-network providers and provides coverage for providers out of network.
PPOs are the most common plan type in the United States, covering 47% of covered workers, according to the Kaiser Family Foundation’s 2020 Employer Health Benefits Survey.
PPO refers to the networks of physicians, hospitals, and other services that contract with insurance companies to provide care at a lower cost, explains Alex Kronk, writer for healthplancritic.com and author of “The Pocket Guide to Medicare Advantage – 2022.”
“These organizations still provide comprehensive health coverage but require utilization of a specific network of providers,” he adds.
In other words, if you have PPO insurance coverage, going to in-network providers will save you a lot of money.
“PPO insurance works by paying discounted rates to healthcare providers in exchange for a higher number of patients,” explains Kronk. So if a provider is in-network, that means they’ve agreed to a discounted rate for services given to people in that plan.
You still have the flexibility to choose an out-of-network provider, but you will have to pay more – sometimes significantly more.
There are three main types of insurance plans: PPOs, HMOs, and HDHPs.
HMOs (Health Maintenance Organization) plans are the least expensive as far as monthly premiums. But you are locked into only using specific providers, and you need referrals to see specialists. “HMOs also require a “gatekeeper” primary care provider that you have to visit before receiving certain services or seeing certain providers,” says Kronk.
HDHPs (High Deductible Health Plans) have lower monthly premiums and higher deductibles than traditional plans. They work in tandem with Health Savings Accounts, which have tax advantages. HDHPs require a bit more hands-on money management and planning to afford out-of-pocket costs until you reach your deductible, whereas PPOs have more predictable costs.
Of the other two plan types, PPOs are more similar to HMOs. If you’re seeking more flexibility and a greater number of provider options, PPOs are a good choice as they offer more extensive networks, and no referrals are required. If cost is the main factor, then an HMO would be the least expensive.
There’s a reason why PPO plans are the most popular in the nation, and that is flexibility. People like to have a more extensive selection of doctors or to see specialists without a referral. Other advantages cited by Kronk include:
As for disadvantages, the main one is cost. The average premiums for covered workers enrolled in PPOs are higher for single ($7,880) and family coverage ($22,248) than the overall average premiums, as per the KFF study.
And although there is more flexibility than an HMO, you are still confined to using “in-networkin network” providers to get the discounted rate. Going out of network can be a costly prospect, but at least you do have that option with a PPO plan if there is a doctor you want to see regardless of price.
It’s always wise to look at a complete comparison of your plan options when deciding which one is right for you. Some employers might even offer more than one PPO plan. If you decide that a PPO is the best option for you, start by looking at the provider network and doing a quick search to see if your regular doctors participate in the plan. Then look over the costs, including the monthly premium, co-pays, and what’s covered, to see if it fits your budget. If you have more than one PPO from which to choose, make a side-by-side comparison to see if one has better coverage than the other or if more of your doctors are in-network for one PPO over the other.
Tammy Burns is an experienced health insurance advisor. She earned her nursing degree in 1990 from Jacksonville State University, obtained her insurance billing and coding certification in 1995, and holds a health and life insurance license in Alabama, Georgia, Iowa, Mississippi, and Tennessee. Burns is Affordable Care Act (ACA)-certified for health insurance and other ancillary, life, and annuity products. She maintains an active nursing license and practices private-duty nursing.
Burns’ background as a nurse, insurance biller and coder, and insurance consultant includes infectious disease, oncology, gynecology, phlebotomy, post operative, family medicine, geriatrics, home health, hospice, human resources, management, billing, coding, claims, fixed annuities, group and individual health and life products, and Medicare. She’s always been driven by a desire to help people, spending more than 25 years as a practicing nurse in hospitals, private doctors’ offices, home health, and hospice. As a nurse, Burns supported patients filing insurance claims with Medicare, Medicaid, and private insurance companies as well as responding to billing questions from confused patients.
Seeing firsthand how unsuspecting patients are frequently confused by an overly complex system they don’t understand led Burns to become an insurance agent and health care consultant, now helping people understand the medical system. Since becoming an insurance agent in 2013, she has worked with some of the largest and most reputable insurance carriers and agencies in the nation, and she has built a large and loyal clientele by way of her commitment to transparency and personalized service.