How a PPO Plan Works
PPO plans offer more choice of providers, but require additional paperwork and are more complex to use.
PPO stands for Preferred Provider Organization. This means that the insurance carrier has contracted with the network provider—physician, hospital, lab, etc.—to provide services to plan members at a negotiated discount.
Plan members can also choose to use providers from outside the network, but will pay the negotiated rate plus any amount over the negotiated rate out of their own pocket.
Here are some key features of how these plans work:
Deductibles
Most PPOs have a plan deductible which must be satisfied before benefits are paid.
Common deductibles vary from $250 for high-end plans up to around $4,000 for "consumer directed" plans. A small number of plans require no-deductible. Some services are available pre-deductible, or deductible waived. These will be listed in the Benefits Summary and Evidence of Coverage.
Copayments
PPOs often require copayments for specific services such as office visits, emergency room, inpatient and outpatient hospital services.
Copayments can be stand alone or in addition to applicable coinsurance amounts and are usually collected at the time of service.Coinsurance
PPOs require the member to pay a specified percentage of the allowed amount for most services after the deductible is satisfied.
This is usually a lower percentage for network providers. In addition, for non-network providers, the member will be responsible for paying amounts over the allowable charge. Coinsurance is usually billed after the service is received.
Authorizations
Although PPOs allow members to choose any provider, some services need to be authorized to be covered.
These will be listed in the Evidence of Coverage booklet.
Claims & Explanation of Benefits
Network providers will generally submit claims directly the insurance carrier. For non-network providers, claims usually must be submitted by the patient.
To reduce the possibility of paying more than required, wait until the carrier sends an Explanation of Benefits (EOB) report before paying a provider's bill. The EOB will show the amount billed, copayments, coinsurance, amounts applied towards the deductible, amount covered by the health plan, and amount owed.
Sometimes non-contracted providers will try to collect from members the entire non-adjusted amount before the provider has processed the claim. This practice, called balance billing, can result in overpayment and is considered illegal in several states.
Categories of Care
Services are usually categorized as preventive or diagnostic, which affects how they are covered.
Some preventive care services and a few office visits are usually covered in full pre-deductible. Diagnostic services - those received to diagnose or care for an existing condition - are provided after the deductible is met.
Be sure to ask if you have preventive and diagnostic care for the same visit that they are billed separately.
Prescription Coverage
Most PPOs offer full prescription drug coverage, including generic and brand-name drugs.
Copayments are tiered by category of drug, and many plans now include a brand-name drug deductible.
Special information about HSA-qualified plans
High deductible PPO plans (HDHPs) that qualify for use with a Health Savings Account have different benefits structures than traditional PPOs.
Group & individual plan differences
Group plans are required to offer certain benefits, such as maternity and mental health services.
Group plans often have richer benefits than individual market plans. Many new individual PPO plans exclude maternity care, and limit non-severe mental health services.