What is a PPO in health insurance?
A Preferred Provider Organization or PPO is a group system composed of physicians, other health care providers, hospitals and clinics organized by an insurance company. PPOs work with third party administrative organizations to provide managed health care plans to insured individuals and families. Medical providers within the network render health care and other medical services to individuals and families who bought health insurance plans from insurance companies at a lower cost compared to what uninsured individuals pay when they seek out medical services.
PPO plans are quite similar to Health Maintenance Organization (HMO) plans. An HMO plan is a form of health insurance, which combines a range of coverages in a group basis, wherein medical professionals offer care through the HMO for a fixed monthly rate without deductibles. Now, both PPO and HMO plans cover the entire cost of the health care consultations made to physicians and administrators within their network. What is the difference between PPO plans and HMO plans?
PPOs offer their policy holders some flexibility in terms of being able to select primary care doctors. You, the policy holder, can elect not to have a primary care doctor; furthermore, you can go see a specialist without the need of having a referral from the network’s primary care doctor. In the case of HMOs, a referral is required in order for you to seek out a specialist’s consult.
PPO plan holders are allowed to seek consult outside the network in the event that you might need a specialist or a doctor not found within the network. These non-network consults however will require the policy holders to pay part of the total expenses since the insurance will cover only a portion of the entire cost.
The advantage of having increased flexibility, however, comes with a cost. Individuals pay more for PPO plans compared to HMO plans hence, PPO plan holders will have to pay higher insurance premiums and will have to pay part of the cost, which will be incurred when seeking consult from health care providers outside the network. This is because the PPO determines the “reasonable cost” of a physician or a hospital’s fees. Should the physician’s or hospital’s fees exceed the PPO’s “reasonable cost” limit, you, the plan holder, will have to pay for the amount not covered. These costs are termed co-pays and they are usually paid at the time of the consult.
Another difference is in the wider geographic coverage that PPO provides. HMOs usually have a defined area of coverage while PPO plan holders have the benefit of having an out-of-state coverage since their network extends farther than most HMO networks.
Typical PPO plans will cover part if not all of these costs:
- Network primary care doctor visits
- Network specialist visits
- Prescriptions
- Diagnostic Treatments (laboratory tests or radiographic procedures)
- Hospital procedures including essential surgery
- Emergency treatment
- Consultations to non-network health care providers
- Dental services
There are some services not covered by the PPO. These include alternative therapies such as aromatherapy, homeopathy and acupuncture. Elective surgeries such as cosmetic or cataract surgeries are also not covered.
PPO plans are available to just about anybody. Individuals, families or businesses can obtain PPO health plans easily. HMO plans, on the other hand, are usually obtained through employers, making it less procurable for some people.
If you are in need of an inexpensive health care plan and still want to have flexible coverages compared to what HMO plans can provide, a PPO health care plan will then best suite you. If you think that you and your family will require medical services from specialists most of the time, then a PPO plan will be more advantageous for you. This is because PPO plans allow plan holders to seek consults with specialists without the need of having a primary doctor within the network to make a referral. Also, the PPO will pay part of the expenses from your non-network consultations. Furthermore, if you and your family frequently travel out of state, your medical services costs will be covered since PPOs provide out-of-state coverage.
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