A PPO (Preferred Provider Organization) is a managed care arrangement consisting of a group of hospitals, physicians, and other providers who have contracts with an insurer to provide health care services to enrollees at a predetermined rate.
PPO health insurance plans also allow members to see physicians and hospitals out of the insurance company's network, however, these visits will require higher out-of-pocket costs for the member.
Most health insurance plans on the individual marketplace today are PPOs. The benefits of going with a preferred provider, or in-network, are typically much greater than if you used a non-preferred physician, hospital, or other provider. Deductibles for out-of-network are typically much higher, co-insurance can be 20% higher, and some plans actually have limits on how much out-of-network coverage is available.
It is important when choosing an individual or group health plan to make sure that your current physicians and hospitals are in the network and that important providers in your community are also in the network. You want to ensure that you rarely, if ever, have to see a provider out-of-network because it will mostly be out of your own pocket, given the high deductibles for out-of-network use.
PPOs have become the most popular form of health insurance since HMO health plans (Health Maintenance Organizations) have fallen out of favor over the last several years ago due to the limited network and referrals required to see specialists.