How Does a PPO Work?

Basics

A preferred provider organization (PPO) is a type of health insurance that creates contracts with various health care providers in return for sending patients to them. A PPO often can save insurers money by working out deals in exchange for exclusive patient recommendations and referrals. Typically, patients can choose any doctor or health care facility from a select group of providers who have joined the PPO network and are approved by the insurance company.

Network

Physicians and other health care providers who have joined the PPO network have agreed to provide discounts to the members of the plan. Subscribers to the PPO may see doctors outside of the network and pay more for the services. The PPO will typically pay the amount they pay for in-network services and the member is responsible for the balance. Often the patient must pay the out-of-network provider up front and apply to the PPO for any reimbursement they are allowed.

Payments

Most PPO plans require members to meet a minimum out-of-pocket deductible expense before they begin paying for services. Once that amount is met for the year, the plan agrees to pay a percentage of health care costs for the members. A copayment is usually attached to every visit and procedure received.

Benefits

Benefits vary between PPO plans. Some offer preventive care services while others restrict payments to necessary procedures. Some have a maximum allowance for preventive screenings and tests, often around $300. Usually, a lifetime maximum is attached to a PPO health insurance policy, which means that the insurer will only pay up to a certain amount, typically $2 million to $5 million, during the lifetime of the insured. Prescription coverage varies as well. Many PPO plans have varying amounts they pay for different medications. A copayment is usually attached to the prescriptions and varies between generic and name brand drugs.

Exclusions

Just as with most health insurance policies, PPO plans often exclude payments for pre-existing conditions, or medical conditions that the member had before signing on with the PPO. Waiting periods for certain procedures such as pregnancy usually are attached to the policy. Read the fine print of any policy before joining the group to make sure you don't fall into any of these categories. Waivers can override some of the exclusions in PPO policies. If you can't find a network provider within 20 miles, some policies will pay the full charges for an out-of-network provider. With approval, some noncontracted doctors may be covered if the subscriber can show that all the in-network physicians are inferior or unable to provide the same level of care and specialization.

Resources

• Med Health Insurance