PPO (Preferred Provider Organization)
Plain English
A PPO is a health plan with a network of doctors and hospitals, where you pay less in network but can still go outside it for a higher price. You usually don't need a referral to see a specialist. That flexibility generally comes with higher premiums than an HMO, and out-of-network care can still be costly.
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Definition
A preferred provider organization (PPO) is a type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. Members pay less when they use in-network providers, and can use providers outside the network for an additional cost. PPOs generally don't require referrals to see specialists.
Why It Matters
A PPO's out-of-network coverage is a safety net, not a discount. Your share can be much higher out of network, the provider may bill you above what the plan allows, and those costs may not count toward your in-network out-of-pocket maximum.
Real-World Example
Imagine a PPO pays 80% for in-network care after the deductible and 60% out of network, with a separate out-of-network deductible. A $2,000 procedure from an in-network surgeon costs the member $400 in coinsurance after the deductible. The same procedure out of network costs at least $800, plus any amount the surgeon bills above the plan's allowed amount.
Common Misconceptions
- PPOs cover out-of-network care the same as in-network. You generally pay more, sometimes much more.
- A PPO has no network. It does; it just pays something toward care outside it.
- PPOs don't use prior authorization. Many still require it for some services.
Key Takeaways
- HealthCare.gov: with a PPO, "You pay less if you use providers that belong to the plan's network."
- You can use out-of-network providers for an additional cost.
- Specialists generally don't need a referral.
- PPO premiums are usually higher than comparable HMOs.
Frequently Asked Questions
What is a PPO?
A health plan with a network of providers where you pay less in network, and can use out-of-network providers for an additional cost.
PPO vs. HMO: which is better?
It depends on what you need. A PPO gives more choice, including out-of-network care and no referrals, usually at a higher premium. An HMO is more limited but often costs less.
Does a PPO need referrals?
Generally not, though some services may still need prior authorization.
Does out-of-network care count toward my PPO's out-of-pocket maximum?
Some PPOs have a separate, higher out-of-network maximum, and amounts above the allowed charge usually don't count. Check your plan summary.
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The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- healthcare.govPreferred Provider Organization (PPO) - Glossary · HealthCare.gov (U.S. Centers for Medicare & Medicaid Services)
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