how preferred provider organizations ppos work
a preferred provider organization is a managed care network consisting of medical professionals and facilities such as primary and specialty physicians hospitals and other healthcare professionals who contract with insurance providers to render services to subscribed participants these are plan participants or consumers who are covered by the insurer s healthcare plan 1plans negotiate fees and schedules for services with healthcare professionals and facilities as such the agreed upon rate is typically lower than their usual charges in exchange for reduced rates insurers pay the ppo a fee to access the network of providers ppo participants are free to use the services of any provider within their network they are encouraged but not required to name a primary care physician and don t need referrals to visit a specialist subscribers may go out of network for coverage but it often comes at a higher cost ppos may be sponsored by a particular insurance company one or more employers or some other type of organization the costs of a ppo planthere are a number of costs associated with ppos and premiums tend to be higher than other types of insurance plans ppo plans tend to charge higher premiums because they are costlier to administer and manage participants are generally responsible for copayments which are paid directly to the provider at each visit there are also deductibles that patients must meet before the plans start kicking in and paying claims in full as noted above plan participants are also allowed to visit out of network facilities usually at a higher cost these charges are based on a reasonable and customary fee schedule if those claims made by these healthcare providers exceed the reasonable and customary fees for services rendered coverage may not apply or most commonly the excess charge is passed on to the patient one important point to note is the degree of flexibility associated with the higher cost of ppos these plans offer more options than others available on the market ppo networks are typically large with providers in many cities and states choosing a provider or accessing one in urgent situations provides value to participants most health insurance plans are serviced through a ppo or an hmo other arrangements include exclusive provider organization epos which are a managed care plan where services are covered only if you use doctors specialists or hospitals in the plan s network except in an emergency point of service pos plans involve lower fees for using providers that belong to the plan s network pos participants can go out of network but need referrals to see a specialist 1preferred provider organization ppo vs health maintenance organization hmo in contrast to ppos health maintenance organization hmo plans require participants to receive healthcare services from an assigned provider this is a primary care doctor who coordinates the insured s care both programs allow the insured to seek specialist care but under an hmo plan the designated primary care physician must provide a referral to a specialist as noted above ppo plans charge higher premiums than almost every other plan for the convenience accessibility and freedom they offer this includes a wider choice of hospitals and doctors plans with the lowest fewest out of pocket expenses such as those with low deductibles and low copayments have higher premiums the elevated premium cost is due to the insurer absorbing more of the associated costs conversely lower premium alternatives translate into higher out of pocket costs for the insured and lower costs for the insurer ppo plans come with more comprehensive coverage including many services that other managed care programs might exclude or for which they would charge an additional premium ppo plans have historically been the preferred choice among employer group participants however today participants want more options for managed healthcare therefore many employers offer hmo plans as well because hmo premiums are less expensive some participants favor hmo plans for their affordability although services and freedoms typically associated with ppo plans are often restricted 