How do PPO deductibles work?

A deductible is an amount you must pay out of pocket for medical care each year. Once you meet it, your health insurance plan will kick in. A PPO plan might have a deductible that applies to in-network providers and another deductible that’s usually higher for out-of-network providers. Before you move forward with a PPO, make sure you can comfortably meet both deductibles.

How do you use a PPO?

If you visit an in-network hospital or doctor, your health insurance company will pay for a percentage of the cost until you reach your deductible and you’ll cover the rest. This is referred to as cost-sharing. While you can go to out-of-network providers, you should expect to pay more out of pocket for their services.

Are you required to choose a primary care doctor?

PPO plans do not require a primary care physician. This means you may coordinate and manage your own care. Of course, if you already have a relationship with a primary care doctor, you can continue to work with them. As long as they’re in network with your plan, you’ll receive the highest level of coverage for their services.

When do you need a referral?

If you want to see a specialist, like a cardiologist or allergist, for example, a PPO won’t require a referral from your primary care doctor. This is great news if you don’t want to wait long to receive specialized care. Ideally, you’d choose an in-network specialist so you can enjoy the most coverage from your health insurance plan.

What’s the difference between a PPO and a POS?

A point of service, or POS, plan is a hybrid of a PPO and an HMO. While your insurance company will offer coverage for out-of-network care, you’ll have to pay a lot more out of pocket. Compared to PPO plans, POS plans are typically less expensive. But they aren’t as flexible as PPOs because they require referrals for specialists.

What is a PPO and How Does it Work?

If your employer offers benefits, you likely have multiple options when choosing health insurance. A preferred provider organization, or PPO, is one health plan option you might want to consider. A PPO can give you the flexibility to visit any hospital or doctor and see specialists without the need for a referral. You’ll be able to manage your own care, without oversight from a primary care physician.

Here’s everything you need to know about PPO insurance plans.

What is a PPO?

A PPO is a type of health insurance plan that lets you pay less out of pocket if you use a hospital or doctor within its network. But it still offers flexibility because you can visit out-of-network providers, as long as you don’t mind paying a bit more for their services. You won’t have to work with a primary care physician, and you may seek care from specialists without a referral from a primary provider. Since PPO plans come with a variety of premiums, co-pays, and deductibles, you can shop around and find a plan that meets your unique financial and health situation.

PPO vs. HMO: What’s the difference?

As you explore health insurance options from your employer, you’ll also likely come across a plan known as a health maintenance organization, or HMO. Compared to a PPO, an HMO usually has a more affordable monthly premium and lower out-of-pocket costs. However, if you have an HMO plan and want to visit an out-of-network hospital or doctor, you’ll have to cover the entire bill. Plus, the money you pay won’t count toward your annual deductible.

Also, unlike a PPO, an HMO requires you to choose a primary care physician who will coordinate your care. If you’d like to visit any specialists, you’ll need to get a referral from that primary care physician. While PPOs have more expensive premiums than HMOs, they offer a lot more flexibility, making their higher cost worthwhile for some people.

Good to know

The majority of Americans had health insurance in 2020 — more than 91%, according to the Census Bureau. Most people with health coverage got it through an employer.

Check Out: What’s the Difference Between Deductible and Out-of-Pocket in Health Insurance?

What does a PPO cover?
How much does a PPO cost?
How to choose a health plan
PPO plan FAQs

What does a PPO cover?

Not all PPO plans are created equal. That’s why it’s worth your time and effort to explore all the options your employer offers and find the ideal plan for your particular needs.

No matter which PPO you go with, it’ll cover the cost to visit your primary care physician, specialists, and other healthcare providers. It will also kick in when you receive care at a hospital, whether you’re there for a planned procedure, an emergency situation, an outpatient service, or an overnight stay.

A PPO plan will also pay for essential health benefits, such as ambulatory patient services; pregnancy, maternity, and newborn care; preventive and wellness services, like shots and screenings; pediatric services; and birth control services.

In addition, a PPO will offer prescription drug coverage, but the insurance company and plan will dictate which medications are covered. You’ll be able to find a list of approved medications in the documents you receive or on your insurer’s website.

While PPO plans usually offer comprehensive coverage, they won’t pay for some services. These include cosmetic procedures designed to improve your appearance, such as plastic surgery and dermatological services. Fertility treatments, off-label prescriptions, and weight loss programs may be excluded as well.

How much does a PPO cost?

When you look for a PPO plan, cost will likely be top of mind. Just like for other health insurance plans, PPO costs vary greatly. Your premium — the amount you pay for your insurance every month — will depend on a number of factors, like your location, tobacco use, the plan you choose, and whether you need coverage for just yourself, yourself and a spouse, or your family.

In addition to premiums, you’ll have to consider:

Co-pays: The amount you must pay for a certain service or medication
Deductibles: How much you have to pay for healthcare services in one year before your plan kicks in and covers the rest
Out-of-pocket maximums: The maximum amount you’ll have to pay in a year for deductibles, co-pays, and coinsurance before your health plan begins covering 100% of your costs

Remember that while PPOs are typically pricier than HMOs and other types of health insurance, they offer greater flexibility.

Learn More: How to Compare Medicare Advantage and Get the Best Plan

Pros

More flexibility: You don’t have to select a primary care provider, can see specialists without referrals, and may visit out-of-network hospitals and doctors as long as you’re OK with paying extra.
Protection away from home: Since you’re not limited to your network of providers, a PPO plan can come in handy when you’re traveling. You’ll be able to see doctors and specialists out of state with ease.
Might offer more services: Some PPOs cover more services than other health insurance plans. For example, they might pay for acupuncture care that might not be covered elsewhere.

Cons

Higher premiums: PPO plans are more expensive than other types of health insurance. If you’re fairly healthy and don’t seek healthcare services very often, you may be able to find a more affordable plan.
Must coordinate your own care: With a PPO, you’ll have to choose doctors and specialists on your own. This means you’re completely responsible for managing your own care.
Potential for more paperwork: If you go out of network, you may be required to submit claim forms. This can be a tedious and time-consuming process.

How to choose a health plan

Employers often offer multiple types of health plans to their employees, so it’s possible you’ll have access to both an HMO and a PPO. Both have advantages and disadvantages, as well as differences in costs and coverages.

The right plan for you will depend on multiple factors, including:

How much you can pay for a premium
How much you can afford for a deductible
Whether lower cost or greater coverage flexibility is your priority
Whether you need access to out-of-network care
Whether you need to insure just yourself, yourself and a spouse, or your family
If the network has providers you prefer or the type of provider you need

PPO plan FAQs

How do PPO deductibles work?
A deductible is an amount you must pay out of pocket for medical care each year. Once you meet it, your health insurance plan will kick in. A PPO plan might have a deductible that applies to in-network providers and another deductible that’s usually higher for out-of-network providers. Before you move forward with a PPO, make sure you can comfortably meet both deductibles.
How do you use a PPO?
If you visit an in-network hospital or doctor, your health insurance company will pay for a percentage of the cost until you reach your deductible and you’ll cover the rest. This is referred to as cost-sharing. While you can go to out-of-network providers, you should expect to pay more out of pocket for their services.
Are you required to choose a primary care doctor?
PPO plans do not require a primary care physician. This means you may coordinate and manage your own care. Of course, if you already have a relationship with a primary care doctor, you can continue to work with them. As long as they’re in network with your plan, you’ll receive the highest level of coverage for their services.
When do you need a referral?
If you want to see a specialist, like a cardiologist or allergist, for example, a PPO won’t require a referral from your primary care doctor. This is great news if you don’t want to wait long to receive specialized care. Ideally, you’d choose an in-network specialist so you can enjoy the most coverage from your health insurance plan.
What’s the difference between a PPO and a POS?
A point of service, or POS, plan is a hybrid of a PPO and an HMO. While your insurance company will offer coverage for out-of-network care, you’ll have to pay a lot more out of pocket. Compared to PPO plans, POS plans are typically less expensive. But they aren’t as flexible as PPOs because they require referrals for specialists.

Anna BaluchInsurance Writer

Anna Baluch is a Cleveland-based personal finance and insurance expert. With an MBA from Roosevelt University, she enjoys writing educational content that helps people make smart financial decisions. Her work can be seen across the internet on many publications, including Freedom Debt Relief, Credit Karma, RateGenius, and the Balance. Connect with Anna on LinkedIn.

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Edited byEvelyn PimplaskarEditor-in-Chief, Director of Content

Evelyn Pimplaskar

Editor-in-Chief, Director of Content

Evelyn Pimplaskar is Insurify’s director of content. With 30-plus years in content creation – including 10 years specializing in personal finance – Evelyn’s done everything from covering volatile local elections as a beat reporter to building fintech content libraries from the ground up.Before joining Insurify, she was editor-in-chief at Credible, where she launched and developed the lending marketplace’s media partnership’s content initiative and managed the restructuring of the editorial team to enhance content production efficiency. Formerly, as tax editor for Credit Karma, Evelyn built a library of more than 300 educational articles on federal and state taxes, achieving triple-digit year-over-year growth in e-files from organic search.Her early career included work as a content marketer, vice president and managing officer of a boutique public relations agency, chief copy editor for 14 weekly Forbes publications, reporting for large and mid-sized daily newspapers, and freelancing for the Associated Press.Evelyn is passionate about creating personal finance content that distills complex topics into relatable, easy-to-understand stories. She believes great content helps empower readers with the information they need to make important personal finance decisions.

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What is a PPO and How Does It Work?

A preferred provider organization is a health insurance plan that allows you greater flexibility to choose your healthcare providers.