Preferred provider organizations, or PPO’s, are among the most popular types of group health insurance plans. There are many features of PPO plans that make them more attractive than other managed care policies, but some characteristics of PPO plans can be problematic or even downright frustrating. If you are faced with an opportunity to select your own plan, know both the advantages and disadvantages of PPO insurance before making a choice.
Read More: PPO Advantages Over HMO
Flexibility of Providers
One of the advantages of a PPO insurance plan is complete flexibility. Unlike other, more restrictive managed care health insurance programs, PPO policies allow members to visit any doctor or medical facility without the need to designate a primary care physician (PCP) who must be seen before other doctors can be consulted.
No Referrals for Specialists
PPO insurance plans allow members to schedule appointments and receive treatment from specialists without first obtaining a referral from a PCP. An advantage of a plan without referrals is faster treatment for complex issues, because a specialist can be consulted immediately; and a lower cost, because no money is spent on an extra visit to a PCP.
Receiving Out-of-Network Benefits
The most advantageous aspect of a PPO health insurance plan is the ability to visit non-network physicians or facilities. PPO plans will pay the bulk of treatment costs for services rendered by doctors, even if they are not contracted as participating providers with the insurance carrier. This allows covered members to obtain treatment from any healthcare professional, regardless of managed care affiliations.
Read More: PPO vs. POS Health Insurance
Disadvantage of a Deductible
A major disadvantage of having PPO insurance over other types of plans is the presence of a deductible. The cost for treatment provided by non-network physicians will not be paid by the insurance company until the member first contributes a lump sum amount toward the invoice.
PPO deductibles can range from several hundred dollars to several thousand dollars. Deductibles (as well as all health insurance costs) have significantly increased in recent years since implementation of the Affordable Care Act, also known as Obamacare, in 2010.
Disadvantage of Co-Insurance
Co-insurance is another disadvantage of PPO plans. After fulfilling the deductible for out-of-network treatment costs, members are still responsible for a portion of any remaining balance. Payment for services received outside the PPO network consists of a percentage split, or cost-sharing amount, between the member and the carrier.
Co-insurance percentages, the amount paid by the insurance company, range from 20 to 90 percent, leaving the remaining 10 to 80 percent on the shoulders of the member.
Avoiding the High Cost
Although PPOs are considered the most expensive, there is a way to get around the high cost. Some companies will offer employees, or individuals can invest in their own secondary insurance or a health savings account (HSA). These accounts hold a certain amount of funds per individual on the insurance plan.
The funds can be used towards deductibles, prescriptions, appointments, or bills. They are becoming a way for companies to keep their out-of-pocket expenses low while providing help to their employees.
Gregory Gambone is senior vice president of a small New Jersey insurance brokerage. His expertise is insurance and employee benefits. He has been writing since 1997. Gambone released his first book, "Financial Planning Basics," in 2007 and continues to work on his next industry publication. He earned a Bachelor of Science in psychology from Fairleigh Dickinson University.