PPO Insurance – A Quick Guide

Are you considering a PPO health insurance plan? You should know how these plans work and if they are right for you. Even if you already have a PPO insurance plan, knowing more about them help you better understand how to use your insurance effectively.

What is PPO Insurance?

PPO insurance refers to “Preferred Provider Organization” insurance. Providers have a list of healthcare providers that they reward you for using. PPOs are a form of managed care health insurance similar to HMO (Health Maintenance Organization) plans but with unique differences

How Does PPO Insurance Work?

  • Spread the Cost

PPO insurance sees you pay part of the costs while the insurer pays the rest. PPOs use cost-sharing to manage costs. You’ll pay a deductible when you see a medical professional or get healthcare services. You also pay co-payments and coinsurance. Cost-sharing is one of the ways PPOs ensure you really need the healthcare services you go for. When you have to pay towards the costs of healthcare, even with a small co-payment, it means you are less likely to be frivolous about healthcare. However, the Affordable Care Act (ACA) means that plans can’t use cost-sharing with certain services.

  • Provider Networks

You’ll pay less when you seek healthcare within the PPOs provider network. A PPO limits whom you can get healthcare services from by using a network of preferred healthcare providers. Insurance companies negotiate with certain providers to get discounts. This network includes every healthcare service you can think of, including labs, physical therapists, X-ray services, medical equipment providers, surgeons, hospitals, and – of course – general practitioners.

You can get healthcare from outside the network but PPO providers discourage this by charging more for out-of-network care. For example, you could have to pay a $40 co-pay when seeing an in-network physician but a 50% coinsurance payment for an out-of-network one. You visit a physician who charges $250. You’d pay just $40 in network but would have to pay $125 if they were out of the network. There’s also no cap on these out-of-network costs, so there’s no telling how much you’ll end up paying.

While you do pay more to see out-of-network providers, one of the perks of using a PPO is that the insurer covers at least some of the costs. An HMO doesn’t pay anything towards out-of-network services unless it’s an emergency, so it’s nice to have some coverage.

  • Prior Authorization Rules

A PPO generally requires you to get pre-authorization for non-emergency services. This authorization is how PPO providers ensure they contribute money to necessary healthcare services. You could require authorization to get an expensive test or treatment. The PPO provider may reject insurance claims if you seek treatment without authorization. Make sure you go through the fine print fo the policy to understand when you need prior authorization and how to get it.

PPOs have different rules on which treatments, tests, and procedures they require pre-authorization for. You’ll likely need authorization for anything expensive or something that could be done another way for cheaper. For example, you’ll need authorization to seek brand name drugs if a generic drug gets the job done for less.

Your insurance provider will want to know why you need this particular test, treatment, or service. They are looking to ensure that you need the treatment in question and there’s no cheaper alternative available. For example, your insurance provider may ask you to seek physical therapy before surgery. They’ll approve the surgery if the physical therapy doesn’t work.

  • No PCP Requirements

Another benefit of PPO insurance is that, unlike with an HMO, you won’t need a Primary Care Physician (PCP). You can see any specialist you want without getting a referral from your physician. Keep in mind that you could still require prior authorization from the insurance provider before seeing a certain specialist, so you may want to contact the PPO before making an appointment anyway.

The Differences Between PPO Insurance and Other Insurance Products

Managed care plans such as exclusive provider organizations (EPOs), Point-of-Service (POS) plans, and HMOs are different from PPO insurance plans – and each other. Some of these plans pay something towards out-of-network care and others don’t. Some of them have reduced cost-sharing and others have big deductibles and have high co-pays and coinsurance. Some of them require you to maintain a primary care physician and others don’t. The main difference between PPOs and other insurance plans is that they tend to be more expensive. This is because they offer you more freedom of choice. So, while you do pay more, you pay for convenience and freedom and definitely still get your money’s worth in the end. A PPO may cost more upfront but costs less over time.

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