Preferred Provider Organization

Preferred Provider Organization (PPO) is a type of health insurance arrangement that allows plan participants relative freedom to choose the doctors and hospitals they want to visit. Obtaining services from doctors within the health insurance plan's network, called "preferred providers," results in lower fees than using doctors outside the network.

Overview

PPO plans generally offer more flexibility than HMO plans, but premiums tend to be higher. Under a PPO plan, a participant can see any doctor without a referral, either inside or outside of their network. However, if the participant visits an "out-of-network" provider, the cost of these services will be higher than if they visited a "preferred" provider.

History

The concept of a Preferred Provider Organization was first proposed in the early 1980s as a response to the rising costs of healthcare. The idea was to create a network of healthcare providers who would offer their services at reduced rates to insurance companies. This would, in turn, lower the overall cost of healthcare for the insured individuals.

Advantages and Disadvantages

Like any health insurance plan, PPOs have their advantages and disadvantages. The main advantage of a PPO plan is the flexibility it offers. Participants can see any doctor they choose, without a referral. However, this flexibility comes at a cost. PPO plans tend to have higher premiums than other types of health insurance plans. Additionally, if a participant chooses to see a doctor outside of their network, they will have to pay more out of pocket.

See Also

• Health Maintenance Organization
• Point of Service Plan
• Exclusive Provider Organization

Preferred Provider Organization Resources
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