You may have come across the term “PPO Insurance” and wonder what it is. PPO insurance is an alternative to HMO health insurance plans that may prove better for some people. It’s essential to understand the difference to make the right choice for you and your loved ones.
What is PPO Insurance?
PPO insurance refers to “Preferred provider organization” insurance. The name comes from insurance companies having a list of providers they prefer applicants to use. You get a discount by using these preferred healthcare providers.
PPOs are a form of managed care health insurance similar to Point of Service insurance and Health Maintenance Organizations.
How Does a PPO Insurance Plan Work?
PPO insurance plans work in several ways, including;
- Cost-Sharing
You share the costs of healthcare with your PPO provider through a cost-sharing system. You pay a portion of the costs of visiting a doctor or using healthcare services in the form of coinsurance, co-payments, and deductibles. Cost-sharing is how PPO providers ensure you need the services you get. You are less likely to get unnecessary treatment or services if you have to pay for them yourself, even if it’s just a small co-payment. Don’t worry about paying too much, as the Affordable Care Act currently prevents cost-sharing for some preventative services.
It sounds counterintuitive, but cost-sharing actually reduces healthcare costs. The more you are willing to pay towards your care, the less your insurance provider pays – and the less you pay in monthly premiums.
- Access to Provider Networks
You pay less when you use a provider in the network of providers. PPOs limit who you can receive healthcare services from through a network of healthcare providers the PPO provider negotiates discounts with to save everyone money. These networks include all manner of healthcare services, including physicians, physical and mental therapists, medical equipment providers, surgery and x-ray facilities, and hospitals.
PPO providers incentivize people to use these preferred providers by offering discounts when you do and charging more when you don’t. For example, you could have a $40 co-pay to see an in-network physician but get charged 50% with a coinsurance charge to see someone outside the network. If you visited an out-of-network physician who charges $250, you’d pay $125 rather than the $40 you would pay to see someone in-network.
This is one of the ways that a PPO is better than an HMO. While you have to pay more for out-of-network care, the PPO provider pays a portion of the costs. An HMO provider doesn’t put anything towards out of-of-network care except in an emergency.
- Prior Authorization
Your PPO provider may require you to get pre-authorized for non-emergency healthcare. Priori authorization ensures that the PPO pays for the services you need and are considered essential. You could be required to get prior approval before undertaking an expensive test, procedure, or treatment. If the PPO requires authorization and you fail to obtain it, they could reject the claim. Ensure that you go through the fine print of a policy and understand when you need prior authorization – and how to get it.
Different providers have different views on what treatments and tests require prior authorization. In general, you’ll likely need pre-authorization for any expensive procedure or something that could be done for less if handled differently. For example, you could be required to get pre-authorization for a brand-name drug, but you wouldn’t need it for a cheaper generic version.
When you – or your doctor – requests pre-authorization from a PPO, they will likely ask why you need this particular test, treatment, or service. The PPO is asking you to ensure that you really need the care and that there are no cheaper alternatives to achieve the same outcome. Another example is that the PPO may ask you to try physical therapy before having an operation. They will approve the surgery if the physical therapy doesn’t help.
- No Need for a PCP
Another way that PPO is better than HMO is that you don’t need a PCP (Primary Care Physician) with a PPO plan. You can go straight to a specialist if you need it without having to consult a PCP first. You could require prior authorization from the PPO, as discussed above, depending on the situation. You may want to consider contacting the PPO before making an appointment.
How Does PPO Differ From Other Insurance Plans?
There are several differences between PPO health insurance plans and managed-care plans, such as HMOs, Point-of-Service, and Exclusive-Provider Organizations. One of the critical differences is paying for out-of-network care. Most PPO plans offer some co-payment for out-of-network care, while other insurance plans can offer no assistance at all. Different plans also have different approaches to cost-sharing. Some have large deductibles, co-pays, and coinsurance, while others have minimal charges. Some programs require you to have a primary care physician. You need to consult this physician before getting access to certain services. Other plans don’t.
In general, a PPO plan is more expensive, but they offer more freedom of choice in return.
