What is a PPO and How Does It Work?

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.

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

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

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