Health Insurance Basics

Health insurance companies contract with medical providers including doctors to provide reduced cost services to patients. Customers generally pay a portion of the fees, with the insurer paying for the remainder.

Preferred Provider Organizations

A PPO insurer pays for some or all of a customer's medical services, but customers have the flexibility to choose any provider they wish to use.

Flexibility

Unlike an HMO, there is no primary care physician in a PPO plan that patients must first visit. This means that a customer does not need to visit a PCP before going to a specialist such as a dermatologist.

Network Providers

While preferred provider organizations allow consumers to visit any doctor or specialist they choose, there are incentives to visit providers within the insurer's network, including reduced deductibles, co-pays and co-insurance fees in some instances.

Out of Pocket Costs

The flexibility offered by PPOs compared to health maintenance organizations is contrasted by the need for insured patients to pay more out of pocket costs in terms of monthly premiums or other fees based on their contract with the insurer.

Source:

American Heart Association: Managed Health Care Plans

Health Affairs: The Puzzling Popularity of the PPO