A preferred provider organization, or PPO, is the most popular type of health insurance plan today.
In a PPO, you pay less if you use doctors, hospitals, pharmacies, and other healthcare providers who have contracts to work in your network. You pay more if you go outside the network.
A PPO plan is generally more expensive, with a higher monthly premium, than other types of plans, such as a health maintenance organization or high-deductible plan. Many of your preventive healthcare services, however, are covered according to federal law.
You will likely have a copayment, ranging from $10 to $40, to see your primary care doctor. Your copay to see a specialist may be higher. You’ll probably have an annual deductible to pay before your insurance company starts to cover your medical bills. You may also have to pay toward an out-of-pocket maximum for prescription drugs.
Most likely you’ll have an annual deductible for out-of-network care (this will be higher than your in-network deductible), and you’ll probably also have coinsurance. You will probably need to pay the doctor directly, then submit a claim to your insurance company for reimbursement. You’ll receive part of your payment back – but only if you’ve met your deductible; in a PPO, you are responsible for the part of the doctor’s fee the insurance company doesn’t pay.
For instance, if an out-of-network doctor charges $300 for a visit, you pay the full amount, then submit a claim to your insurance company for reimbursement. If you have not met your deductible – say $4,000 – your insurance company pays you nothing back, but the plan applies the $300 toward your deductible. If you have met your deductible, your coinsurance fee may be 20 percent of the cost of the visit. The PPO may recognized and pay you back only 60 percent of the cost, or $180, minus your coinsurance payment. That means you’ll be reimbursed $120.
You won’t need a referral from your primary care doctor to see another doctor, such as a specialist, in your network – although some specialists may ask you to get one. You may need prior approval from your insurance plan for some expensive services, such as an MRI.
It is very important to understand all of your in-network, and out-of-network, costs before you sign up for a health insurance plan. You should always consider all of your anticipated healthcare costs, as well as plan for unanticipated healthcare costs, before choosing a health plan.
June 15, 2015
Christopher Nystuen, MD, MBA