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What Does the Abbreviation in PPO Insurance Stand For?

A Preferred Provider Organization (PPO) is a health insurance plan that offers a network of health care providers that have contracted with the insurance company to provide services to the plan's members. Although members can visit any doctor, they must visit in-network providers to receive maximum benefits. A PPO has several advantages and disadvantages.

  1. Basics

    • A PPO will provide its members a list of in-network providers. A member can choose to see an out-of-network provider, but the insurance coverage will be less than it would be for an in-network provider. For example, a PPO might cover 90 percent of the cost of a visit to an in-network provider but only 70 percent of the cost of a visit to an out-of-network provider. PPO members are usually free to see a specialist without first visiting a primary care physician.

    PPO Enrollment

    • With 53.2 million members, PPOs were the second most common type of managed care plans in 2010, according to the Kaiser Family Foundation. Health Maintenance Organizations (HMOs) were the most common with 66.21 million members.

    Costs

    • PPOs are usually more expensive than HMOs. In addition to the monthly premium, members typically pay co-pays and coinsurance and may have a deductible. A co-pay is a set fee a member must pay each time he visits a doctor or receives medical services. Coinsurance is a percentage of the cost of services the member must pay. A deductible is the amount of money a member must spend out-of-pocket each year before the PPO begins paying. Co-pays and coinsurance are usually higher for out-of-network providers.

    Advantages

    • The key advantage of a PPO is flexibility. PPO networks are usually extensive with hundreds of providers to choose from. Members also have the option of choosing an out-of-network provider if they are willing to pay the extra cost. Unlike HMO members, PPO members are not obligated to choose a primary care physician and can usually visit specialists without a referral.

      PPOs typically have an out-of-pocket maximum, which is the most a member will be required to pay each year before the PPO covers the remaining costs.

    Disadvantages

    • Cost is the main disadvantage of a PPO. A deductible and coinsurance can easily push the cost of PPO coverage above the cost of an HMO plan especially if the provider is out-of-network.

      Providers bill PPO members directly. This creates more paperwork and potential billing complications for the PPO member.

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