Is a PPO Health Plan Right for You?

When signing up for health insurance, it’s easy to get confused by the multitude of options, not to mention all the acronyms. Two of the most popular health insurance plans out there are preferred provider organization (PPO) plans and health maintenance organization (HMO) plans.

While both of these plans provide health care coverage, they do so in different ways. It’s important to understand the differences between these plans to ensure you get the right coverage for your particular situation.

Let’s take a closer look at PPOs and examine how they work, what coverage they provide, and how they differ from other plans.

Network size

Both PPOs and HMOs have a network of providers from which you may receive services. Your health plan contracts with doctors and hospitals in their network to provide services at a discounted rate. Because they’ve negotiated lower rates with these providers, your health plan wants you to stick to the doctors and hospitals in the network.

If you have a PPO, you can pick any doctor in the network, whether that’s a general practitioner or a specialist (we’ll talk more about specialists later). If you’re considering enrolling in a PPO, make sure you are familiar with the plan’s provider network before signing up. You might want to check if your favorite doctor and local hospital belong to the network.

You’ll also want to be aware of what labs are in your plan’s network. Your doctor may send blood work and other tests to a lab for analysis. If that lab isn’t in your plan’s network, you’ll have to pay additional costs.

Role of the primary care physician

A primary care physician (PCP) is the doctor you see for preventive care or when you’re sick. With a PPO plan, you may or may not have to select a PCP. For PPO plans that do not require a PCP (or a referral), you can browse the network and schedule an appointment with a specialist, for example a dermatologist, on your own. If your PPO plan requires you to get a referral from your PCP before seeing a specialist, you’ll have to see your PCP first.

With an HMO, you usually have to select a PCP and see them first for any medical needs. Your PCP is responsible for authorizing treatment and, if they recommend you see a specialist, they’ll likely refer you to a specific individual.

It’s important to note that not every HMO requires you to have a PCP or a referral to see specialists, but many do. PPO plans may give you more freedom to see a specialist without a referral and choose which specialists you see. This will require you to do more legwork since you’re the one responsible for researching the right provider and coordinating your care.

Out-of-network visits

Remember when we said your health plan wants you to use an in-network doctor or hospital? We weren’t kidding. While both PPOs and HMOs prefer you use in-network providers, PPOs are more flexible if you receive treatment from an out-of-network provider.

If you’re enrolled in a PPO and receive services from a provider who is not in your plan’s network, the PPO may still cover a percentage of the costs. But you’re going to pay a much higher rate. Your part of the balance could be extremely high.

As we mentioned earlier, in-network facilities have already negotiated costs with your insurance provider. Out-of-network facilities have not and can bill whatever charges they see fit.

Once your insurance provider pays its percentage, the facility will send you a bill for the remaining balance (this practice is called “balance billing”). That amount could be a shock.

In contrast to PPOs, HMOs typically don’t cover costs for care received from providers outside the network, so you’ll be on the hook for 100% of the costs.

Regardless of which plan you choose, be sure to read the benefits information carefully. This is where you’ll learn which out-of-network services your health plan covers and how much they’ll pay for these services.

Plan costs

The flexibility and choice that PPOs provide typically come with higher monthly premiums. In addition to premiums, you’ll also be responsible for paying copayments (the amount due at the time you see a doctor) and deductibles (the amount you have to pay for covered services before your insurance kicks in).

These costs can vary significantly by plan. Be sure to read your benefits information to understand your out-of-pocket obligations. If you have questions, speak with your benefits administrator or human resource representative.

Is a PPO right for you?

Picking the right health plan is serious business. It’s vital that you carefully consider whether a PPO is the right choice for you and your family. Be sure to evaluate the coverage, costs, services and limitations of each available health plan before making a decision.

It’s also important that you consider these factors with an eye on the future. While you might not need access to certain medical services or specialists now, you may need them down the line.

Talk to your human resources department or benefits specialist if you have any questions about the pros and cons of PPOs.