Health Insurance 101: What’s a PPO Plan?

You’ll save money by knowing how a PPO plan works.

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When choosing a health insurance plan, one of the options you’ll see is something called a PPO plan. With all the other information you need to take in, it’s easy to ignore acronyms like this. However, understanding your plan can actually help you save money on your health care.

What Is a PPO Plan?

PPO stands for “Preferred Provider Organization.” It gets its name because there are preferred healthcare professionals who are in your plan’s network. That means they have a contract with the health insurance company to offer their services at a certain rate. These are called in-network providers.

With a PPO plan, you can see out-of-network providers (those who don’t have a contract with the insurance company). However, you will likely have to pay extra. This is different from an HMO plan, where your insurance typically won’t cover an out-of-network provider at all, so you’ll likely end up paying full price. In other words, in-network providers are preferred, but they’re not required.

Will You Need a Primary Care Doctor?

Another thing that sets PPO plans and HMO plans apart is whether they require you to have a primary care physician. This is a doctor who oversees your comprehensive health care. They are the person you visit for your annual checkups, for example.

HMO plans generally require you to have a primary care doctor, and you usually need to get a referral from this doctor before visiting any specialists. This often helps people with HMO plans save money by avoiding unnecessary trips to a specialist. (Fees for specialists are generally higher than fees for a visit to your primary care doctor.) Often, people visit specialists when it's actually a concern that a primary care physician could treat.

By contrast, PPOs don’t usually require you to have a primary care physician (although it’s still a good idea). Plus, you can usually visit a specialist without getting a referral from a primary care doctor first with this type of plan.

Some people find this feature of PPO plans beneficial because it offers more freedom and flexibility. They can see out-of-network providers and make their own choices about when to see a specialist. However, it’s important to understand that it costs more to visit out-of-network providers and specialists, so you should be familiar with your plan’s costs before making these decisions.

Paying for Your Plan

PPO plans may have fewer rules than HMO plans, but they do tend to have higher premiums. That’s the monthly fee that you pay for your health insurance (kind of like a subscription fee). In other words, the extra flexibility may come with a slightly higher cost.

That doesn't mean a PPO plan can't be an economical choice. If you have a PPO plan, you can save money by:

  • Choosing in-network providers whenever possible
  • Understanding when it’s more appropriate to see a primary care physician instead of a specialist
  • Choosing in-network specialists when needed

If you still have questions about PPO plans, talk to your human resources department or a representative for the insurance company. They can provide more information to help you pick the right plan for you and your family.