A PPO (preferred provider organization) is a type of health insurance plan that offers you a network of doctors and hospitals for care, but doesn’t require you to choose a primary care physician (PCP). You will pay the lowest prices if you go to in-network health care providers, but PPOs usually still cover some out-of-network costs. PPO plans also don’t require you to get a referral from your primary care doctor in order to see a specialist physician.
A PPO may work well for you if you think you’ll need to receive care outside of your home state (or even county) or if you make regular visits to a specialist, like a dermatologist or psychiatrist. The trade off for the flexibility of PPOs is that you will likely pay higher monthly premiums, especially when compared to HMOs. You can usually find a PPO plan from your employer or through a health insurance marketplace.
How does a PPO work?
A PPO is a health insurance plan that gives you access to a network of preferred health care providers — physicians, specialists, hospitals, clinics, etc. The insurance company contracts with those doctors and hospitals so that they will charge set prices for certain services. (This system is broadly called managed care.) You can visit these in-network providers at a lower cost than providers outside of your network. However, PPOs do not limit you from seeing doctors outside of the PPO network. You will very likely pay more for care at out-of-network providers than at in-network providers, but most PPO plans cover at least some of the bill for an out-of-network provider.
If you’re traveling out of the state and need medical care, your PPO network may also cover a physician or hospital that’s outside of your primary state of residence.
PPOs and primary care physicians
You don’t need to choose a primary care physician (PCP) with a PPO. A PPO also lets you go straight to a specialist physician, like a dermatologist or cardiologist. You don’t need a referral from your primary doctor in order to make an appointment with a specialist.
The cost of PPOs
The greater flexibility of PPOs means they typically have higher monthly premiums than some other types of health plans (like HMOs, which we discuss next). If it’s important to you, the freedom to see both in-network and out-of-network doctors may be well worth the larger premium. Premium rates also aren’t the only cost to consider. You may pay less for services you need, saving you money throughout the year, even if your premiums are higher.
To get more information about specific plans, check plan details during the annual open enrollment period.
HMO vs PPO
Another popular type of health insurance is a health maintenance organization plan, or HMO plan. There are a few main differences between PPOs and HMOs.
HMOs also offer you a network of health care providers, but HMOs generally limit your coverage to a more local network of doctors, hospitals, and other health care providers. If you ever need to receive care from a doctor or hospital outside of your plan’s network, your insurance may not cover it and could end up paying most or all the bill yourself.
Unlike PPO plans, you need to have a primary care doctor and HMO plans require you to get a referral from your primary care doctor before seeing a specialist. If you see a specialist without a referral, even if they are within your network, your insurance company will likely cover little or none of the cost, leaving you with a much higher bill.
While HMOs can be more restrictive than PPOs in terms of their network, HMOs often have lower monthly premiums than PPOs. So if you expect to only need preventive care services and want to save money, you may prefer an HMO to a PPO. Always compare the details of individual plans before buying, though. Lower premiums could mean you have a higher deductible or higher copays.
Other types of health insurance plans
EPO plans (exclusive provider organization plans) are often described as a hybrid between PPOs and HMOs. EPOs are a type of health insurance plan that typically doesn’t cover out-of-network providers but also doesn’t require referrals to see specialists. If you think you will regularly need to meet with a specialist, learn more about the differences between PPOs, HMOs, and EPOs.
Indemnity plans, known as fee-for-service plans, aren’t traditionally managed care plans like the ones we have discussed above. Indemnity plans offer you the greatest freedom in choosing your doctors, but they only reimburse you a portion or percentage of the cost for medical services. That reimbursement level is determined in advance so make sure to check plan details.
Note that PPOs are also available for Medicare C plans, which provide coverage from private insurers.
Still not finding what you need? Learn about some other types of health insurance.