Let's face it -- health insurance plans are complicated. Before you can decide what plan best suits your needs, you should have a well-rounded knowledge of the different types of plans. Preferred provider organizations (PPOs) are the fastest-growing kind of health care plan. With more than 158 million Americans enrolled in a PPO this year, this plan has become the choice of more than half of all Americans with health insurance coverage [source: AAPPO]. In this article, we'll take a closer look at PPOs to find out why they've become such a popular option.
A PPO is a type of managed-care system in which health care providers, such as doctors and hospitals, have made an agreement with the insurance companies to offer substantially discounted fees to the company's members. The system has a kind of "you scratch my back and I'll scratch yours" feel to it. The health insurance company gets a discount from the provider, which theoretically is passed along to you, and in return the provider gets a much larger group of patients to bill. The result is a trickle-down effect of savings for the consumer. The customer gets discounted rates at the doctor's office, the doctor gets a guaranteed supply of patients and the insurance company gets premiums from a larger number of customers.
PPOs offer a few advantages over their counterparts. Most often cited is the amount of freedom they offer. Unlike other managed health care organizations, a PPO does not require you to maintain a primary care physician (PCP), nor does it require you to use your PCP as a gatekeeper. This means that you can seek care from a specialist without first getting a referral. Also, you have the freedom to choose care from a provider outside of the provider network should you require it -- the expenses can be substantially higher, but you at least have the option to choose any doctor or hospital you like.