What Does PPO Stand for in Insurance?

One of the three types of managed health care plans in the United States, the Preferred Provider Organization (PPO) plan has several advantages and disadvantages by comparison with the two other types: Health Maintenance Organization (HMO) and Point of Service (POS) plans. PPO plans cover millions of people, giving its members the freedom to make their own decisions on obtaining health care services. However, this plan costs members more out of pocket than the two others.

Provider Network

• All members of PPO plans are given a list of doctors in their geographical locations who are contracted to provide medical services at discounted rates (provider network) by the insurance companies. By visiting these physicians, PPO members receive greater insurance benefit and pay less out of pocket. If a member decides to seek non-network care, they are given less insurance benefits because the costs of these health services are not negotiated with their insurers. This leads to higher out-of-pocket expenses for the member.

Benefits

• PPO plan members have more flexibility when it comes to doctor choices than members of both POS and HMO health plans. Unlike HMO and some POS plans, in which members are restricted to receiving medical care within their provider network, PPO members can visit doctors in and out of network and still have insurance coverage. They will have to pay more out of pocket such as higher deductible and co-pay amounts as a result. However, PPO members' out-of-pocket costs are typically limited by the insurers, according to AgencyInfo. Depending on the policies of the insurance company, the out-of-pocket costs for in-network care are typically capped at $1,200 for individuals ($2,000 for non-network services) and $2,100 for families ($3,500 for non-network services).

Facts About PPO Plans

• PPO plans have the second-largest member population of the three managed-care plans in the United States, trailing only those covered under HMO plans. In 2010, PPO plans covered 53 million people, while HMO plans covered 66 million, according to the Kaiser Family Foundation. In 2009, the number of people covered by both PPO and HMO plans were 61 million and 64 million.

Considerations

• PPO plan members are afforded more flexibility than the other types of plans by not being required to choose a Primary Care Physician (PCP). A PCP is a doctor chosen by a member from the provider network to coordinate their health care services. HMO and some POS plans require members to pick a PCP. Without a PCP, PPO members are able to visit a doctor of their choice without restriction or denial of insurance coverage if a visit isn't approved by a PCP.

Warning

• Although PPO members have the flexibility to see doctors of their choice, they have to pay more out of pocket for these visits. Members of PPO plans may be responsible for as much as half of their medical bill if they seek medical services out of network, according to the American Heart Association. In comparison, if the PPO member stays in-network for care, they can be reimbursed for as much as 90 percent of their medical costs, according to AgencyInfo.