What Is PPO Insurance?

PPO stands for preferred provider organization and is one of the most popular types of health insurance plans. A PPO differs from other popular options such as HMOs and POS plans because of its flexibility and wide network of doctors. For most PPO plans, patients do not need to choose a primary care physician (PCP) and do not need referrals for specialist services, such as going to see a dermatologist or cardiology specialist.

PPOs also typically provide some coverage for services delivered outside of the preferred provider network. The tradeoff for this flexibility and freedom, however, is higher monthly premiums and deductibles.

Understanding the Preferred Provider Organization (PPO)

A PPO is a type of health insurance plan and, in a broad sense, fills much the same role as a health maintenance organization (HMO), exclusive provider organization (EPO), or point-of-sale (POS) plan. Where PPOs differ, however, is their overall network size and flexibility when it comes to how you seek care.

Key Features of a PPO

Flexibility in choosing your preferred health care providers
No referral needed to see specialists
Reduced cost for in-network care
Coverage for out-of-network care
Large network size

Like with most other insurance types, using a preferred provider — a physician, pharmacy, or facility within the PPO’s network — results in lower costs for care. But unlike other insurance types, patients can also use providers outside their network and still be covered by PPO insurance, though the PPO plan may not contribute as much to the cost of out-of-network providers.

For example, you may pay higher deductibles, copays, and coinsurance when you seek out-of-network care. But PPOs still offer more coverage for out-of-network options than HMOs and POS plans, which provide limited or no coverage for services not within network.

PPO Insurance vs. Other Insurance Types

	PPO	HMO	EPO	POS
Average premium	High	Low	Moderate	High
Average network size	Large	Moderate	Large	Variable
Designated primary care physician	Not required	Required	Not required	Required
Referrals to seek specialist care	Not required	Required	Required	Required
Out-of-network care coverage	Yes, partially covered	Not covered	Medical emergencies only	Yes, with limitations

Along with PPOs, other common health plan types include health maintenance organizations (HMOs), exclusive provider organizations (EPOs), and point of sale (POS) plans. Depending on your current health needs, health history, and budget, your plan of choice may differ.

PPO Insurance vs. HMO Insurance

	PPO	HMO
Average premium	High	Low
Average network size	Large	Moderate
Designated primary care physician	Not required	Required
Referrals to seek specialist care	Not required	Required
Out-of-network care coverage	Yes, partially covered	Not covered

A big draw of a Health Maintenance Organization (HMO) plan is that it can be more cost-effective than other types of insurance, since you typically pay a lower monthly premium and have lower out-of-pocket costs for medical services.

However, you may have less flexibility in choosing healthcare providers and facilities in comparison to a PPO plan, as you’ll generally need to stay within the HMO network. For example, HMOs typically do not provide any out-of-network coverage at all except in case of emergency.

HMOs also require a designated primary care physician, who you would go through to receive referrals to see specialists if you need those services. For example, if you would like to see an endocrinologist, you would need your primary care physician’s referral to have that service covered.

Which Should You Pick: PPO or HMO?

It may make sense to choose an HMO over a PPO if your local healthcare providers are covered under the plan and you have no intention to move out of the HMO’s network in the near future. This way, an HMO’s smaller network size would not necessarily affect you. If you also do not mind designating and going through a PCP for specialist referrals, an HMO’s limitations could be overlooked in favor of its lower costs.

A PPO, meanwhile, may be a better choice if you’re looking for more control over your healthcare and are willing to pay more for that flexibility.

PPO Insurance vs. EPO Insurance

	PPO	EPO
Average premium	High	Moderate
Average network size	Large	Large
Designated primary care physician	Not required	Not required
Referrals to seek specialist care	Not required	Required
Out-of-network care coverage	Yes, partially covered	Medical emergencies only

The main benefit of an Exclusive Provider Organization (EPO) plan is that it often offers lower out-of-pocket costs like copays and coinsurance rates and a wider range of healthcare options than an HMO plan, while still being more affordable than a PPO plan. You’ll typically pay a moderate monthly premium, but you’ll have access to a broad network of healthcare providers and facilities within your plan’s network.

However, an EPO does not cover care from out-of-network providers unless it is deemed a medical emergency and tends to have a higher deductible than PPO plans to offset its lower premiums and out-of-pocket costs.

Which Should You Pick: PPO or EPO?

Like with an HMO, using an EPO makes sense if you’re cost-conscious and your preferred providers are in network. This way, your need to go out of network for service is minimized, reducing the chances you would be affected by how EPOs do not provide that coverage. Meanwhile, a PPO may be a good choice if you want to keep your deductible lower and live in an area where more healthcare providers are out of network.

PPO Insurance vs. POS Insurance

	PPO	POS
Average premium	High	High
Average network size	Large	Variable
Designated primary care physician	Not required	Required
Referrals to seek specialist care	Not required	Required
Out-of-network care coverage	Yes, partially covered	Yes, with limitations

A differentiating benefit of Point of Service (POS) plans compared to other types of insurance is that most POS plans do not have a deductible that patients must meet before their insurance kicks in. However, this is only the case if you seek care from in-network doctors, and premiums are usually comparable to or higher than PPO insurance premiums.

POS plans require a referral from a designated primary care physician if you want to seek specialist care, such as booking an appointment with a dermatologist. Out-of-network care is also typically covered, though with higher copays and coinsurance.

Which Should You Pick: PPO or POS?

As the main draw of a POS plan is that it does not feature a deductible for in-network care, this could be a good choice if your coverage needs outweigh the higher premium costs. If you need more flexibility for out-of-network care and prefer more provider options, consider a PPO.

Your Care Network With PPO Insurance

Health insurance plans allow policyholders to access medical care at a lower cost than they would pay out of pocket if they were uninsured, as long as they use services and healthcare providers that are covered under the plan’s network.

PPOs tend to have large care networks, meaning policyholders likely have a wide range of healthcare providers to choose from, including specialists, pharmacies, and healthcare facilities like hospitals. As long as you receive care from within this network of providers, your policy’s usual deductible, copays, and coinsurance rates would apply.

Why Is In-network Care Cheaper?

Insurance companies make agreements with healthcare providers to ensure patients pay less for care than if they were uninsured. In return, physicians and specialists have a dedicated base of clients because policyholders must stay within the insurer’s network of providers to receive the lower care costs.

For example, a health insurance plan might list 12 local primary care physicians as in-network providers. If you make an appointment with any one of these physicians, your insurance may cover some or all of the cost, depending on the details of your deductible and copayment terms. However, if you choose another physician outside of these 12 in-network options, your insurance may cover only a portion of the costs, alongside higher deductible and copayment requirements — or provide no coverage at all.

How Does PPO Insurance Cover Out-of-network Care?

PPO insurance does include out-of-network benefits. This means even if you seek care from someone not within your PPO plan’s network of healthcare providers, you will still receive some coverage from your plan in most cases.

You may have a favored specialist who left your insurance plan’s network, but due to your history and comfort with them, still prefer to see them instead of switching to an in-network provider. Or, perhaps your area does not have any specialists who are within your plan’s network, so you must go out of network for that care.

In both cases, your PPO plan will likely still provide some coverage, but at a higher cost. For example, the copay may be $80 per visit instead of your in-network $25 per visit, and your coinsurance may be that you pay for 40% of the total cost for out-of-network care instead of your in-network coinsurance where you pay for 20% of the total cost.

How to Find In-network Care

There are a few ways that you can find an in-network healthcare provider, whether it is a primary care physician, specialist, hospital, or pharmacy.

Look for a directory of providers from your insurance company. This directory will typically list all of the doctors, hospitals, and other healthcare providers that are part of your insurance plan’s network, along with their contact information and locations. This is typically found on your insurance company’s website, where you may access a member portal. You may need to make an account to access this, so have your insurance information ready, such as your member ID.
Contact your insurance company to ask for help. If you are unsure of how to find an in-network provider for your needs, you may contact your insurance company directly for help. Call their customer care phone number to speak with a representative, who may be able to locate someone in your area for you to seek care.
Ask your in-network provider for recommendations. If you already have an in-network primary care physician, they may be able to provide recommendations for other in-network providers and facilities.

The Costs of a PPO Plan

There are 5 general costs of a PPO: premiums, deductibles, copayments, coinsurance, and your out-of-pocket maximum.

Premium: This is the amount you pay each month for your plan. You pay this amount regardless of whether or not you access any health services, and the amount may increase year over year as you age and your health risk profile increases.
Deductible: This is the amount you pay out of pocket before your insurance activates. Once the deductible has been fully paid for the year, you may not need to pay it again until the following year. Some PPO plans have two deductibles: one for in-network providers and another for out-of-network providers.
Copays: This is the flat fee you pay out of pocket for a service, even after your deductible has been met. This means that you pay this amount every time you receive treatment from a PCP or specialist. The fee amount can differ for generalist practitioners and specialists. This is typically charged at the time of the appointment.
Coinsurance: This is usually represented as a percentage and designates how much of the total cost of the healthcare service you and your insurer will pay once your deductible has been met. The coinsurance percentage can differ based on the type of procedure, test, or treatment.
Out-of-pocket maximum: This is a set amount that indicates the most you would have to pay for services covered by your health insurance each policy year. Any eligible costs beyond this amount would be completely covered by your health insurance.

On average, PPOs have higher premiums and deductibles than HMOs or POS plans because they provide greater flexibility when it comes to choosing a provider, specialist access without referrals, and out-of-network coverages.

See It in Action

Here is an example of these costs in action if your plan had the following costs:

Premium: $500 per month
Deductible: $2,000 per year
Copay: $25 per appointment
Coinsurance: 30% for outpatient surgery
Out-of-pocket maximum: $8,700

This means that you pay $500 per month whether you use your plan or not.

When you do go to the doctor or receive any kind of in-network medical treatment, you pay a $25 copayment.

Until you have paid $2,000 in applicable health costs for the year, your insurance will not cover anything. Your monthly premium and copays do not count towards this deductible.

Once you have paid the deductible, you would pay for 30% of the procedure’s cost while your insurer would pay for the remaining 70% of the cost.

Then, if your covered medical procedures end up costing you more than $8,700 — not including your premiums, copays, or deductible — you would only pay up to that amount and any remainder would be covered by your health insurance.

Pros and Cons of PPO Insurance

When it comes to determining whether a PPO insurance plan is a good option for you, consider the pros and cons of this insurance type.

Pros of PPO Insurance

Flexibility in choosing healthcare providers: Patients can see any healthcare provider within the PPO network without a referral, and they can also choose to see out-of-network providers, although the cost is typically higher.
No designated primary care physician needed: A primary care doctor or physician is a general practitioner that’s in your insurance network. Not having to stay with one specific doctor for all your needs could make it easier to find appointment times that work with your schedule.
No referrals required: Specialist services can be accessed directly, rather than requiring a referral from your primary care physician before you may access that care. This reduces the time it takes to get the care you need, as well as the overall cost as you do not need to book and pay for two separate appointments. However, this is not always applicable as some PPO insurers do still require referrals for specialist services.
Reduced cost for in-network care: PPO plans have discounted rates for medical care received from in-network providers.
Out-of-network coverage: Seeing an out-of-network healthcare provider will result in higher costs, but PPO plans do provide some coverage for out-of-network care. This can be especially beneficial for patients who need to see a specialist who is not part of the PPO network.
Access to a large network: PPO plans usually have a large network of healthcare providers, which can give patients access to a broad range of medical specialists and facilities without having to go out of network.

Cons of PPO Insurance

Higher premiums: The increased freedom and flexibility of PPO plans means premiums tend to be more expensive than other types of plans, such as HMOs. This can make them less affordable.
Higher out-of-pocket costs: While PPO plans may offer more flexibility in choosing healthcare providers, they also typically have higher deductibles, copays, and coinsurance.
Limitations to out-of-network coverage: The fact that PPO plans offer coverage for out-of-network care at all is a boon, but this coverage is still limited. Patients are usually responsible for a larger portion of the cost if they seek out-of-network care, which can be a significant drawback for those who need to see an out-of-network provider for specialized care.
Preapproval may be needed for some procedures: While some specialist treatments do not require a primary care physician’s referral, many PPO plans still require preapproval before you are granted coverage for some procedures. A preapproval, also known as a pre-certification, is when your insurer authorizes a test or treatment. This is handled by your doctor who requested the procedure, but preapproval still does not guarantee that the entire cost will be covered.
More plan management needed: While accessing specialists without a referral is a benefit of PPOs, it also means more time spent managing your own plan to make sure the providers you’re using are in network — or, if not, what it may cost to seek care from them.
Complexity of coverage: PPO plans can be complex to navigate because they have multiple coverage options and different cost structures. This can make it difficult for patients to understand their coverage and compare plans effectively.
Potential for balance billing: Balance billing is when you are billed for the difference between what your insurance covers and what the healthcare provider charges. While some states have laws to protect patients from balance billing, it can still be a potential issue for those with PPO plans. However, PPO plans must disclose this possibility if applicable.

How to Choose a PPO Insurance Plan

If you’re considering a PPO health insurance plan, it’s worth taking stock of your current provider network, the overall costs of PPO insurance, and how it compares to other insurance plans.

What to Consider When Evaluating a PPO Plan

Does the PPO network include your preferred doctors, clinics, and pharmacies? The network of healthcare providers included in the PPO plan is an important consideration. Ensure that your preferred healthcare providers are included in the network, and that there are sufficient options for specialists too in case you need them.
What are the overall costs of this plan? PPO plans can be more expensive than other types of plans, so carefully consider the costs associated with it, such as the monthly premium, deductible, copay, coinsurance, and out-of-pocket maximum. Think through your anticipated healthcare needs in the coming year to decide whether a high or low deductible plan is the best option.
What are the out-of-network costs? While it is preferable to stay within network, that is not always possible. If you know you will likely need out-of-network coverage at some point, such as if your preferred specialist is out of network but everyone else is within network, you will want to ensure the coverage is still within your budget.
What is the coverage for your specific healthcare needs? Consider whether the PPO plan covers your specific healthcare needs, including any prescription medications, medical devices, or specialized treatments or procedures you may require.
What are the specific plan features? Review the specific features of the PPO plan, including whether referrals are required for specialist care, whether there are any exclusions or limitations on coverage, and whether there are any wellness or preventive care benefits included.
What is the overall reputation of the insurance company? Research the reputation of the insurance company offering the PPO plan, including its financial stability, customer service, and satisfaction ratings.
When can you enroll? Be aware of the enrollment period for the PPO plan and ensure they enroll within the appropriate timeframe. For example, if you need coverage right away after joining a new job and are comparing the employer’s PPO plan options to an individual Marketplace PPO plan, know that you can enroll in your employer’s plan right away, but may need to wait until the next Open Enrollment Period to enroll in an individual Marketplace plan.

How to Compare Your PPO Options

Make a comparison chart or table of your options. Using the factors mentioned above, make a table or spreadsheet clearly listing out all of the details for each plan you are considering. This way, you may look at the different options side by side and see how they stack up to one another.
Prioritize what matters to you the most. Make note of which factors matter to you the most so that you know those are the main things you want to compare. For example, perhaps you are most concerned about whether your preferred doctors are within network, the insurer’s overall reputation, and the overall costs of care. Knowing this, you can focus your comparisons on those factors first.
Consider your current and anticipated care needs. If you have specific appointments and procedures planned for the coming year, this could inform which costs and coverages you ought to focus on. For example, if you plan to get pregnant, coverage for obstetrics, maternity care, and your preferred birthing hospital should be heavily weighted.
Narrow your options. Once you have your current and anticipated care needs as well as priority factors in mind, narrow your options to only the plans that best suit all of those needs and wants.
If you are still stuck, ask for advice. Picking a plan can be overwhelming, but you do not have to do it entirely on your own. If you need a second — or even third — opinion, consult with a trusted healthcare provider. Or, reach out to a trusted insurance agent to determine which PPO plan may be the best fit for your specific healthcare needs.

Putting It All Together

PPO insurance offers more flexibility and choice overall, especially in comparison to other health insurance types. For example, policyholders have more control over choosing their doctors and hospitals, even if the provider is out of network. PPO plans are also one of the most popular plan types, so networks tend to be large, allowing for more in-network options.

The cost of this flexibility, however, is that PPO insurance plans have higher premiums compared to most other types of insurance plans. It’s essential to compare different health insurance plans and their benefits to determine which one is the best fit for individual needs and budget.

PPO Insurance: An Introduction to Preferred Provider Organizations