What is PPO Insurance?

When it comes to health insurance, you’ve probably heard the term “PPO.” Perhaps you’re thinking about signing up for one through your workplace, the health insurance marketplace/exchange, or Medicare Advantage. This article will explain what PPOs are, how they differ from other types of health-plan administration, and whether a PPO is the best option for you.

Understanding PPOs

The term “PPO” refers to a preferred provider organization. PPOs received their name from the fact that they have a list of preferred healthcare providers. You save money if you obtain your health care from one of these trusted providers.

PPOs, like their distant cousins, health maintenance organizations, or HMOs, are a type of managed care health insurance plan. POS (point of service) and EPO are two other forms of managed care plans (exclusive provider organization).

How Managed Health Care Plans Keep Costs Down

There are regulations in every managed care health plan about how you must obtain your health care. These include things like whether you have to stay in-network if you need a referral from a primary care provider, and whether certain services require prior permission. If you don’t follow the terms of a managed care plan, it will either not pay for your care or you will be penalized by having to pay a larger amount of the cost out of your own pocket.

These restrictions apply to managed care health plans in order to keep healthcare expenses under control. The rules often do this in one of two ways:

  • They limit your healthcare services to those things that are medically required or that make your healthcare expenditures lower in the long run, like preventive care.
  • They impose restrictions on where you can seek healthcare and negotiate reductions with providers in their network.

How a PPO Works

The following are the manner in which PPOs work:

Cost-sharing: You pay a portion of the cost, and the PPO pays the rest. A PPO, like almost all types of health insurance, uses cost-sharing to help keep prices down. You pay a portion of the cost of healthcare services in the form of deductibles, coinsurance, and copayments when you see a healthcare practitioner or utilize healthcare services.

Cost-sharing is a feature of a PPO’s system for ensuring that the healthcare treatments you’re receiving are truly necessary.

When you have to pay for your care, even if it’s just a small copayment, you’re less likely to use unnecessary services (there are concerns, however, that even small cost-sharing can also be an obstacle that keeps some plan members from receiving necessary care; some health care reform proponents have proposed transitioning to a system that does not have cost-sharing when medical care is received).

Non-grandfathered plans are prohibited from requiring cost-sharing for some preventative care under the Affordable Care Act.

Cost-sharing is a method of reducing the cost of your medical care. The more you contribute to the cost of your care, the less your health insurance plan will pay, and the cheaper your monthly premium rates will be.

Provider networks: Using a PPO’s network of providers saves you money. By utilizing a network of healthcare providers with whom it has negotiated discounts, a PPO restricts who or where you obtain healthcare services. A PPO’s network comprises not only physicians and other healthcare providers, but also labs, X-ray facilities, physical therapists, medical equipment providers, hospitals, and outpatient surgical centers, to name a few.

It’s critical to recognize that a PPO can have a vast or tight network.

It should be rather straightforward to stay in-network and get the lowest possible out-of-pocket charges if you choose a broad-network PPO. However, if your PPO has a limited network, you may find yourself venturing outside of it more frequently than you intended.

When you receive care outside of the PPO’s network of providers, you will be charged a higher deductible as well as higher copays and/or coinsurance.

For example, an in-network healthcare provider may have a $40 copay, but an out-of-network healthcare provider may have a 50% coinsurance rate.

If an out-of-network practitioner charges $250 for an office visit, you’ll be charged $125 instead of the $40 copay you’d be charged if you went to an in-network doctor. When you receive care outside of the network, the out-of-pocket maximum is usually at least twice as high.

In some circumstances, there is no out-of-pocket maximum for out-of-network care, which means that the patient’s expenses can continue to rise indefinitely (the ACA’s out-of-pocket cost restrictions only apply to in-network rates).

In addition, even if you’ve already paid the cost-sharing needed by your health plan, out-of-network doctors might balance bill you after your PPO pays a portion of the claim.

Because the out-of-network provider does not have a contract with your insurance, he or she is not obligated to accept the insurer’s reimbursement rates as full payment.

(Note that the No Surprises Act, which goes into effect in 2022, forbids balance billing in emergency cases and situations where a patient seeks care at an in-network hospital but unwittingly obtains services from an out-of-network provider while there.) Balance billing is still permitted if the patient decides to see a physician who is not in their network.)

Even though you pay more when you use out-of-network healthcare providers, one of the benefits of a PPO is that it contributes to the cost of those services when you utilize out-of-network physicians.

One of the ways a PPO varies from an HMO is in this regard. If you obtain care outside of your HMO’s network, you won’t be reimbursed unless it’s an emergency.

Prior authorization: In many circumstances, a PPO will need you to obtain pre-authorization for non-emergency services. Prior authorization allows a PPO to ensure that it is only paying for medical services that are truly essential, thus your insurer may need you to obtain pre-authorization before undergoing costly tests, surgeries, or treatments.

If your PPO requires prior authorization and you do not obtain it, your claim may be denied. As a result, it’s critical to examine the fine print of your policy to see whether you’ll require prior authorization for certain medical services.

PPOs vary in which tests, operations, services, and treatments they require pre-authorization for, but you should expect pre-authorization for anything expensive or that may be done more inexpensively in another way. For example, you may be able to fill prescriptions for older generic drugs without a pre-authorization, but you’ll need to ask your PPO for approval to fill a prescription for a more expensive brand-name drug to treat the same ailment.

When you or your healthcare practitioner applies for pre-authorization from your PPO, the PPO will most likely want to know why you need that test, service, or treatment. It’s basically a check to see if you actually need that care and if there isn’t a better cost-effective approach to get the same result.

When your orthopedic surgeon requests pre-authorization for knee surgery, for example, your PPO may require you to first attempt physical therapy. If physical therapy fails to resolve the problem, the PPO may decide to pre-authorize knee surgery.

No need for a PCP: Unlike HMOs, a PPO does not require you to have a primary care physician (PCP). You don’t need a recommendation from your primary care physician to see a specialist. However, depending on the circumstances, you may want prior authorization from your insurance company, so call your PPO before scheduling a medical consultation just in case.

What Is the Difference Between a PPO and Other Health Insurance Plans?

HMOs, exclusive provider organisations (EPOs), and point-of-service (POS) plans are managed-care plans that differ from PPOs and each other in numerous ways. Some insurance plans cover out-of-network care, while others do not.

Some have low cost-sharing, while others have high deductibles and high coinsurance and copays. Some require a primary care physician (PCP) to operate as a gatekeeper, letting you obtain healthcare services only with a recommendation from your PCP, while others do not.

Furthermore, PPOs are often more expensive (for a plan with equivalent cost-sharing) because they provide you more flexibility in terms of medical providers.

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