PPO Plans: What Are They?

A preferred provider organization, or PPO, is a health or dental insurance plan that contracts with hospitals and doctors to create a network of coverage. Typically, PPO insurance will offer cheaper costs if you use providers within your network. You can still go to out-of-network doctors, but expect to pay an additional cost. On average, a PPO policy will be more expensive when compared with other types of provider networks, due to its increased freedom and flexibility.

What is a PPO insurance plan?

A PPO insurance policy is a type of health or dental insurance plan that will usually allow you to pay less if you use a doctor, hospital or facility that is within your network. However, unlike other plan types, like health maintenance organizations (HMOs) or exclusive provider organizations (EPOs), a PPO provides flexibility, because you can still visit out-of-network providers. You just may pay more for their services.

One exception to this is if you need emergency care. Under the Affordable Care Act (ACA), insurers are required to cover out-of-network costs for emergency care, since a consumer often will not have a choice as to where the ambulance will take them. Frequently, care is provided at the closest hospital available.

A PPO insurance plan also allows you to visit any doctor without the need for a referral. In some other health plans, you may need to visit your primary care physician (PCP) to be evaluated, and then you would be able to go to a specialist once your PCP has made the referral. PPOs allow you to bypass this and won't require you to select a PCP for your health insurance.

What are the differences between a PPO and other networks?

All health insurance policies will provide coverage for services. The main difference is where you can get those health services, which is determined by the provider network of your health insurance plan.

In addition to where you receive care, different networks will also determine how much you’ll pay for those health services. This makes choosing a health policy with the right network for your needs extremely important.

HMO vs. PPO

The main difference between a health maintenance organization (HMO) and PPO is that you will need to designate a primary care physician (PCP), who will coordinate your care if you have an HMO plan. In this case, you will also need a referral from that PCP in order to visit any specialists and will most likely need to pay full price for any health services out of your network.

An HMO will have a slightly cheaper premium when compared with a PPO because of an HMO’s tighter restrictions on where you can receive care.

EPO vs. PPO

Exclusive provider organizations (EPOs) have the strictest rules regarding which health facilities and doctors you can visit. With an EPO you can only visit in-network providers, unless you need emergency care. This is more restrictive than a PPO. Given these restrictions, before selecting an EPO health insurance plan, you should check that there are in-network providers in your area that accept the policy.

POS vs. PPO

Point of service (POS) policies and PPOs differ only in the amount of flexibility they offer. Both network types will allow you to visit in-network providers at reduced rates and even provide cheap rates if you visit an out-of-network specialist. However, with a POS plan, you will need to designate a PCP, who will need to refer you if you want to see a specialist.

How much does a PPO plan cost?

Because PPO plans provide the most flexibility for the person insured, most individuals will find that PPOs have the most expensive monthly premiums. The average monthly cost of a PPO health insurance plan for a 40-year-old is $576, which is 20% more expensive than an HMO policy.

Even though a PPO plan is typically the most costly health insurance policy you can purchase, you are often paying for more convenience, flexibility and robust coverage. For example, a PPO policy can be useful for someone who has unique health needs, such as back pain that requires a visit to a specialist chiropractor.