What is a PPO Plan?
PPO plans (or “Preferred Provider Organization”) plans are one of the most sought-after types of plans within the Individual and Family markets. PPO plans let you visit any in-network doctor or healthcare provider without requiring a referral from your primary care physician.
Do you think about signing up for a PPO plan to get health insurance? Understanding how the PPO works will help you make sure that it suits your needs. Are you already enrolled in the PPO? Understanding how it works will help you use your health insurance effectively and avoid expensive mistakes.
PPO stands for preferred provider organisation. They have a list of preferred providers they would prefer that you use. These preferred providers will charge you less for your healthcare.
PPOs are a type of managed care health insurance plan like their distant cousins, health maintenance organizations, or HMOs. Other types of managed care plans including POS (point of service) and EPO (exclusive provider organization).
How managed health care plans keep costs down
Each managed care plan has rules that govern how you can access your health care. These rules include whether you must stay in-network or if you require a referral from your primary care provider. You also need to be able to authorize certain services. You will be charged more if you don’t comply with the rules of a managed-care plan.
These rules are used by managed care plans to control health care costs. These rules are generally applied in two ways:
- They restrict your healthcare services to only those things that are medically required or that will lower your healthcare costs in the long-term, such as preventive care.
- They restrict where you can access healthcare services and negotiate discounts with providers within their network.
How Does PPO plan work?
You’ll be encouraged by your PPO plan to use their network of preferred physicians and will usually not need to choose a primary doctor. In-network healthcare services are covered at a higher level than those provided by out-of-network providers. You should verify that your provider accepts your plan to ensure you get the best benefit coverage.
Before your insurance company begins covering your medical bills, you will likely have an annual deductible. For certain services, you may have to pay a copayment of $10-30 or a percentage of the total cost of your medical bills.
May be right if you are:
- You have the right to choose any type of medical facility or provider that meets your needs.
- Your insurance company should cover a portion of your out-of-network claims
- Referrals are not a good idea before you visit a specialist.
Cost-sharing: The PPO pays part and you pay the rest. A PPO uses cost-sharing to help keep costs in check. You pay a portion of the cost of healthcare services and deductibles when you visit the doctor. Cost sharing is part of a PPO system to ensure you have the right healthcare services. You’re less likely not to use unnecessary services if you have to pay something, even a small copayment. However, there are concerns that even small cost sharing can be an obstacle to some plan members receiving the necessary care. Some health reform advocates have suggested that a transition to a system without cost-sharing for medical care.
The Affordable Care Act allows non-grandfathered policies to avoid having to pay for preventive services.
Cost-sharing helps to offset the cost of your healthcare. Your monthly premiums will be lower if you contribute more to your healthcare costs.
Provider networks: You pay less if you use the network of providers offered by a PPO. PPOs have a network of providers that offer discounts and limit who or where you can receive healthcare services. The network of PPOs includes all types of healthcare services, including labs, Xray facilities, physical therapy, medical equipment providers and hospitals.
You will be able to use the PPO as an incentive to seek care from its network. However, you may have to pay a higher deductible, higher copays, and/or coinsurance if you are outside of its network. You might pay a $40 copay to visit an in-network doctor, but 50% for out-of-network physicians. For example, if an out-of-network doctor charges $250 for this office visit, you will pay $125 instead of the $40 copay that you would have paid if you had used an in-network provider. And the out-of-pocket maximum is usually at least twice as high if you’re receiving care outside the network. Sometimes, the out-of network maximum is not applicable to all cases. This means that charges can increase without a cap. The ACA limits on out of pocket costs are only for in-network services.
Additionally, out-of-network providers can balance bill you after your PPO pays a portion of the claim, even if you’re already paid the cost-sharing required by your health plan. The reason is that the provider outside of your network doesn’t have an agreement with your insurer. They are not required to accept the insurers reimbursement rates as full payment.
Even though you will pay more for out-of network providers, one advantage of a PPO plan is that the PPO contributes to the cost of out-ofnetwork providers. This is how a PPO differs to an HMO. If you are in an emergency, your HMO will not pay for it.
Prior authorization: In many cases, a PPO will require you to get non-emergency services pre-authorized. Prior authorization allows a PPO the ability to ensure it only pays for necessary healthcare services. In this case, insurers may require that you obtain pre-authorization prior to you undergoing expensive procedures or tests. The PPO may reject your claim if you do not get prior authorization. It is important that you read your policy to determine if prior authorization is required before receiving certain medical services.
Although PPOs have different requirements for which services, tests, and treatments they need to pre-authorize for, you should expect that you will need pre-authorization for any expensive treatment or procedure. You might be able get older generic drugs filled without pre-authorization, but you will need to obtain your PPO’s authorization for a brand-name drug that is used to treat the same condition.
The PPO will ask you and your doctor for pre-authorization. The PPO is trying to determine if you truly need the care and if there are other options. Your PPO may require that you first try physical therapy before your orthopedic surgeon authorizes your knee surgery. If physical therapy doesn’t solve the problem, the PPO might pre-authorize your knee operation.
There is no requirement for a PCP: HMOs don’t require you to have a primary physician (PCP) or a PPO. You’re free to go directly to a specialist, without a referral from a PCP. You may need authorization from your insurance company depending on your situation. If this is the case, it’s best to call your PPO before you make a medical appointment.
What is the difference between a PPO and other types of health insurance?
Managed-care plans like HMOs, exclusive provider organizations (EPOs) and point-of-service (POS) plans differ from PPOs and from each other in several ways. Some plans pay out-of-network coverage, while others don’t. Some require minimal cost sharing, while others have high deductibles that result in significant coinsurance or copays. Some plans require that you have a PCP to act as your gatekeeper. This allows you to only receive healthcare services if your PCP refers you. Others don’t. Additionally, PPOs tend to be more expensive than plans with similar cost-sharing because you have more options when it comes to the providers you can choose.