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What Is the Meaning of PPO?

A preferred provider organization, or PPO, is a health care insurance plan that joins physicians and health care facilities in a network of service providers to serve policyholders. PPOs offer distinct features that distinguish them from their closely related counterparts, health maintenance organizations, or HMOs. Knowing the meaning of PPO can help you to make the right decision for your health insurance needs.

  1. PPO Basics

    • Along with health maintenance organizations, PPOs account for the majority of healthcare insurance policies held by employees and self employed individuals. PPOs establish a network of doctors and medical specialists --- preferred providers.

      Patients who visit a service provider in the network receive the full amount of benefits stated in their insurance policies. Patients who visit outside doctors and specialists generally receive a smaller amount of coverage, generally between 70 and 80 percent of the normal coverage rates. PPOs also feature two different deductibles for each policy, one for in-network physicians and another for all others.

    Advantages

    • A PPO insurance plan offers more choice and flexibility than its counterpart, the HMO, as patients can easily see any doctor or specialist they wish, understanding the differences between coverages offered for in-network and out-of-network service providers. Choosing to visit an out-of-network provider requires less administrative red tape than it does with an HMO, expediting and taking the hassle out of the process of receiving care.

    Disadvantages

    • The advantages of PPOs come with a price --- literally. The main drawback of these insurance plans is that they generally cost more than other options in terms of monthly premiums. Because of their higher premiums, PPOs can be better suited to people who frequently travel outside of the coverage area and absolutely require a plan that allows them to see out-of-network doctors with at least some coverage.

    Health Maintenance Organization

    • Health maintenance organizations are the most popular alternatives to PPOs. HMOs work much the same way as PPOs, but are structured slightly differently. Patients in an HMO are completely restricted to using in-network physicians, and must obtain approval from the HMO before seeing a specialist for which there is no alternative in the network. The advantage of this relative lack of choice and flexibility is the generally lower cost to patients compared with PPOs.

      One drawback of HMOs that is absent in PPOs is that patients are required to designate a primary care physician who they must see for all checkups and general, nonemergency medical issues. PPO policyholders, on the other hand, are allowed to see any physician in the network at any time.

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