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Preferred Provider Organization (PPO's)

What is a PPO's
These plans combine aspects of both a Traditional Indemnity and HMO plans. The cost for this plan is also "middle of the road."

An A PPO or Preferred Provider Organization is a group system of health care organized by an insurance company. Physicians, health care providers of all types, hospitals and clinics sign contracts with the PPO system to provide care to its insured people. These medical providers accept the PPO’s fee schedule and guidelines for its managed medical care.

The insured members pay a co-payment at the time of each medical service. For example, at the time of an office visit to a physician, the patient pays $20. Each person will also have a yearly deductible to pay out of his/her pocket, before the insurance company will start paying medical fees. The insurance usually pays a percentage of the medical fees (often 80%) for the in-network doctor, with the patient responsible for the remainder of the bill. If the person wants to see an out-of-network doctor, he/she may do so without permission; but the deductible for out-of-network services may be higher and the percentage the insurance will pay may be lower. In other words, the patient will be responsible for a greater part of the fee. This encourages the people insured with a PPO to use the physicians, other medical providers and hospitals in their network.

Advantages of a PPO include the flexibility of seeking care with an out-of-network provider if so desired, even though it is more out-of-pocket expense for the patient. PPO networks also have prescription services which provide prescription drugs at a reduced cost. The overall premium for a PPO is less than for individual health coverage and will often include more covered medical services. There is a large network of medical providers representing large geographic areas.

Advantages:

• The plan offers financial incentives to see physicians in their preferred provider network
• Many services require the patient to pay just a copayment, such as for outpatient visits or prescriptions
• A person may continue to see a physician who is not part of the preferred provider network, but at a reduced payment

Disadvantages:

• Deductibles and coinsurance do apply for many services, such as hospitalizations and out-of-network services
• Claims are submitted by the medical provider, making it important for the health plan to pay the claim correctly
• The premiums and employee contribution costs are higher than those of any HMO, but lower than a Traditional Indemnity Plan

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