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Preferred Provider Organization
Preferred Provider Organization (PPO) is a managed care organization
that aims to cut costs of medical care but simultaneously offers
a greater range of choice. This fast growing plan consists of medical
practitioners, hospitals, and other health care providers who have
covenanted with an insurer or a third-party administrator to provide
health care at reduced rates to the insurer's or administrator's
clients. If measured on a health insurance "scale", Preferred
Provider Organization is positioned in between Health Management
Organizations (HMOs) and pure fee-for-service plans. In PPO, your
health care is managed and therefore restricted, but you get a wider
measure of choice as well.
A PPO plan is similar to an HMO in the sense that in return for
a fixed monthly premium, you receive basic health care benefits
from the insurer and its health care network. However, it is also
different from HMO as PPO does not require a primary care physician
(PCP) for referral to a specialist. The amount of co-payment will
go up if you wish to have health care from outside the network,
than what you would have paid if the provider belonged to the PPO
network. So it boils down to a choice between a costlier indemnity
plan with total freedom of choice over care and a low-cost HMO plan
that restricts your care to within a network.
A PPO plan has a number of advantages: health care is cheaper if
you use the PPO networks; you are free to consult any specialist,
including those outside the plan; it is not mandatory for you to
visit a primary care physician and out of pocket costs are limited.
Among its disadvantages are: treatment outside of network is more
expensive; co-payments are larger when compared to other managed
care plans and you may be required to satisfy a deductible.
You should keep in mind that PPO insurance is the costliest among
all managed care plans. Even if the premium is reasonable, the other
fees can raise the cost of PPO considerably. For example, in addition
to premium, you may have to pay coinsurance (the amount goes higher
if you use non-network providers). As far as preventative services
are concerned, co-insurance is generally waived and replaced with
a low co-payment.
If you opt for non-network care, you have to satisfy a deductible
before the insurer begins contributing. Once the deductible is met,
you must pay a higher percentage of the cost and may also have to
cough up the difference between what the health care provider charges
and what the plan considers "reasonable and customary"
for the service. Still a PPO plan remains popular because premiums
alone are not an accurate indicator of your potential annual medical
While choosing a PPO plan, you should be aware of how many doctors
are available, the locations of offices and hospitals in the network,
the manner of handling referrals to specialists, its emergency care
services, hospitals available under the plan, health care and preventive
health care services covered, the amount of premium, the additional
amount to be paid for using non-network physicians, the deductible
and coinsurance for non-network care and certain other aspects.