PPOs
Like an HMO, a preferred provider organization (PPO) is a managed
healthcare system. However, there are several important differences
between HMOs and PPOs.
A PPO is actually a group of doctors
and/or hospitals that provides medical service only to a specific
group or association. The PPO may be sponsored by a particular insurance
company, by one or more employers, or by some other type of organization.
PPO physicians provide medical services to the policyholders, employees,
or members of the sponsor(s) at discounted rates and may set up
utilization control programs to help reduce the cost of medical
care. In return, the sponsor(s) attempts to increase patient volume
by creating an incentive for employees or policyholders to use the
physicians and facilities within the PPO network.
Rather than prepaying for medical care, PPO members
pay for services as they are rendered. The PPO sponsor (employer
or insurance company) generally reimburses the member for the cost
of the treatment, less any co-payment percentage. In some cases,
the physician may submit the bill directly to the insurance company
for payment. The insurer then pays the covered amount directly to
the healthcare provider, and the member pays his or her co-payment
amount. The price for each type of service is negotiated in advance
by the healthcare providers and the PPO sponsor(s).
Advantages of PPOs
Free choice of healthcare provider
PPO members are not required to seek care from PPO physicians. However,
there is generally strong financial incentive to do so. For example,
members may receive 90% reimbursement for care obtained from network
physicians but only 60% for non-network treatment. In order to avoid
paying an additional 30% out of their own pockets, most PPO members
choose to receive their healthcare within the PPO network.
Out-of-pocket costs generally limited
Healthcare costs paid out of your own pocket (e.g., deductibles
and co-payments) are limited. Typically, out-of-pocket costs for
network care are limited to $1,200 for individuals and $2,100 for
families. Out-of-pocket costs for non-network treatment are typically
capped at $2,000 for individuals and $3,500 for families.
Disadvantages of PPOs
Less coverage for treatment provided by non-PPO physicians
As mentioned previously, there is a strong financial incentive to
use PPO network physicians. For example, members may receive 90%
reimbursement for care obtained from network physicians but only
60% for treatment provided by non-network physicians. Thus, if your
longtime family doctor is outside of the PPO network, you may choose
to continue seeing her, but it will cost you more.
More paperwork and expenses than HMOs
As a PPO member, you may have to fill out paperwork in order to
be reimbursed for your medical treatment. Additionally, most PPOs
have larger co-payment amounts than HMOs, and you may be required
to meet a deductible.
|