A preferred provider organization (commonly referred to as a PPO) is one of many types of health insurance options available. A distinguishing feature of a PPO is the ability to see doctors as you please, with low rates for providers within the PPOs network. This distinguishes it from a health maintenance organization (HMO), the other most common type of insurance plan, where a primary care physician (PCP) is required to give a referral for any specialists the insured might need. In a PPO, a PCP is not required. For help with medical costs more broadly, and to start saving for when you’re older and will likely have greater medical needs, consider working with a financial advisor.
PPO Health Plans: How They Work
PPO stands for preferred provider organization. If you apply for a PPO health plan, you’re not required to follow any strict guidelines when it comes to receiving medical care. For example, you don’t need to choose a primary care physician (PCP) who you’ll visit regularly.
Under a PPO health plan, you’ll have a network of healthcare providers who participate in your plan. But you can technically see any doctor regardless of whether they’re in your network. That means you would have access to more healthcare professionals than you would under a standard HMO health plan.
PPO Health Plan Perks
PPO plans are generally more flexible than HMO (health management organization) plans are. If you want to see a physician or visit a hospital that you found on the internet, you won’t need a referral from a PCP. And if the doctor you’ve been seeing for years is suddenly no longer part of your network, you can continue to visit him or her anyway if you have a PPO plan.
Since you’re not obligated to visit the specialists or medical facilities within your network, it’ll be easy to find a doctor if you need one while you’re traveling outside of the country or visiting another state. Your PPO health plan can pay for your medical services even if you’re outside of your network. In contrast, people with HMO plans must see the providers and specialists within their network in order for their insurance to pay for their medical care (unless there’s a dire emergency).
PPO Plan Drawbacks
The downside to having a PPO is that these plans generally cost more than HMO plans. You’ll pay a higher insurance premium every month. And in many cases, you’ll be required to pay a deductible before your healthcare coverage kicks in. You may have to pay for other costs as well, like copays or coinsurance.
Your out-of-pocket expenses could also be higher if you have a PPO plan instead of an HMO plan. Whenever you visit a specialist or hospital outside of your network, you’ll pay more out of pocket than you would if you only used the providers within your network.
Depending on the doctor you see, you may have to pay for your medical care upfront and file a claim later asking your insurer to cover their share of your medical costs. This tends to happen when you venture outside of your network of healthcare professionals. But if your health insurance claim is denied, you may not receive any sort of reimbursement for the healthcare expenses you paid out of pocket.
Having to pay for healthcare without the help of insurance could be financially devastating, particularly if you haven’t made room in your budget for an emergency fund.
PPO Plan: Should You Get One?
To answer that question, you’ll need to think about your healthcare needs, your lifestyle and your financial situation. If your job forces you to travel a lot or you enjoy vacationing in different places throughout the year, having a PPO plan could come in handy (especially if you’re injury-prone or you get sick often). You’ll have more freedom when it comes to choosing healthcare providers and hospitals. And if that’s more important to you than the cost of your medical care, you may not mind paying more out of pocket under a PPO plan.
On the other hand, having a PPO plan could wreak havoc on your finances. If you’re trying to save money for a major purchase or retirement, you might be better off with a low-cost health plan like an HMO plan.
The Bottom Line
PPO plans offer more flexibility than HMO plans. But in exchange for this benefit, you’ll likely pay more for your health insurance. To avoid letting healthcare costs bust your budget, it’s a good idea to shop around and look for PPO plans with lower premiums. Going with an in-network doctor or medical facility over an out-of-network provider can also help you save money.
- For help on navigating healthcare costs and all other financial matters, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool connects you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors, get started now.
- Health insurance isn’t the only type of insurance you need. Make sure you have life insurance, especially if you have a family who will need help if you were to have an unfortunate accident.
Photo credit: ©iStock.com/asiseeit, ©iStock.com/asiseeit, ©iStock.com/monkeybusinessimages