What is a preferred provider organization (PPO)?

Choose from a wide network of providers under this type of health insurance plan.


Elissa Suh

Published August 19, 2019

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  • A preferred provider organization (PPO) is a type of health insurance plan

  • Benefits of a PPO plan include a wide network of providers and out-of network coverage

  • You can also see a specialist physician, like an OB/GYN, without a referral

  • HMOs and PPOs are both popular managed care plans in health insurance

A preferred provider organizations (PPO) is a type of health insurance plan that features a network of doctors and hospitals that provide a lower rate. PPOs may also cover the costs of some medical expenses outside of their network. Unlike with a health maintenance organization (HMO), another popular type of health insurance plan, PPO plans do not require that you get a referral from your primary care physician to see a specialist.

In this article:

What is a PPO insurance plan?

Many health insurance plans, whether purchased on the marketplace or provided by a workplace, try to strike a balance between the qualify and cost of care. How this works is the insurance company chooses which doctors and hospitals to contract with and agree on the costs. This is broadly called managed care, and the most popular types of health insurance coverage fall under this category.

The network of medical providers differs with each type of plan. A preferred provider organization, or PPO, is a health insurance plan that allows you a lot of freedom when you choose a healthcare provider or doctor.

For starters, PPO plans work with a preferred network of providers -– hence the name. There is a long list of in-network physicians, specialists, and hospitals that you can consult and see these providers for less money. However, PPOs do not limit you from seeing doctors outside of the PPO network. Most PPO plans cover at least some of the bill for an out-of-network provider. But, you will likely pay more for the care at out-of-network providers than at in-network providers.

If you’re traveling out of the state and need medical care, your PPO plans may also cover a physician or hospital in their network that happens to be out of your primary state of residence.

PPO plans also allow you to skip your primary care physician and go straight to a specialist physician, like a dermatologist or cardiologist. If you need to see a specialist, you can make an appointment with them directly without a referral.

Because of the greater flexibility of PPOs, they typically have more expensive monthly rates than other types of health plans. But 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 depend on many factors. You can read more about health insurance premiums and how much they cost.


Another popular type of health insurance is an HMO, or health maintenance organization plan. HMOs generally limit your coverage to a particular network of doctors, hospitals, and health care providers. The HMO network is typically smaller than the PPO network.

Unlike PPO plans, HMO plans require you to get a referral from your primary care doctor before seeing a specialist.

PPO plans tend to have more expensive monthly premiums than HMO plans, though you may pay less for other services. The HMO plan focuses on preventive care and wellness.

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Other types of health insurance plans

  • EPO (exclusive provider organization): Often described a hybrid between PPOs and HMOs, EPOs are another managed care plan. This plan typically doesn't require referrals to see specialists, and does not cover out-of-network providers.

  • Indemnity plans: Known as fee-for-service plans, traditional indemnity plans are not managed care plans. While this plan offers you the greatest freedom in choosing your doctors, it only reimburses you a portion or percentage of the cost for medical services, determined in advance.

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Health insurance and life insurance work together to offer financial protection.

Health insurance can pay your medical expenses. Life insurance keeps your loved ones whole after you die.

About the author

Personal Finance Editor

Elissa Suh

Personal Finance Editor

Elissa is a personal finance editor at Policygenius in New York City. She writes about estate planning, mortgages, and occasionally health insurance. In the past she has written about film and music.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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