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Health Insurance: PPOs 101


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In general

A PPO (Preferred Provider Organization) health insurance plan is similar to a traditional Fee-For-Service (Indemnity) plan in that you have unrestricted choice about what health care provider and facility to use, when to see or use them, and what kind of treatment you want. The only requirements are that the care you want has to be a covered benefit, and it must be "medically necessary."

With some PPOs, you pay health care bills directly to the provider and then seek reimbursement from the insurer less any co-payment percentage. In other cases, the doctor or other provider bills the insurer for payment. The insurer then pays the covered amount directly to the healthcare provider. You pay the provider the copayment amount.

The variation from a Fee-For-Service plan is that with a PPO, the insurance company contracts with a network of doctors and other health care providers (often including hospitals) to provide care for a discounted, set, pre-determined fee. PPOs encourage you to use network providers rather than one that does not have an arrangement with the insurer by requiring you to pay more for care not from the PPO's network of providers.

Features Of A PPO

  • Co-Insurance: 
    • Like fee-for-service indemnity plans, PPOs have a co-insurance feature in which the insurance company pays a percentage of the fee. You pay the rest. One of the incentives PPOs use to induce you to see network providers is that a PPO usually pays a higher percentage of the charges of a network doctor than it pays for non-network doctors. For example, a PPO may cover 90% of the cost for network doctors, but only 70% for non-network doctors.
    • Some PPO plans even go further in giving you incentive to see network doctors by eliminating co-insurance all together when you visit a network doctor and only charge you a flat fee, or co-pay, such as $10 or $20 per visit.
  • Deductible
    • Like fee-for-service indemnity plans, a typical PPO plan generally has an annual deductible, an amount you pay before any health expenses are covered.
    • Sometimes the PPO deductible is lower or waived entirely if you use network doctors or other providers.
  • Stop-Loss  There is also a stop-loss in PPOs, just as in Fee-For-Service (Indemnity) plans. A stop-loss clause sets a limit on the amount you pay out-of-pocket for your health care per year (in addition to the amount of premium.) Again, the stop-loss clause is sometimes higher for non-network providers than for network ones.

When You Go To A Healthcare Provider

  • The first time you visit a doctor or other health care provider's office, you will likely be asked to sign a form which assigns your insurance benefits to the provider. This permits the health care provider to be paid directly from the insurer. It also means you don't have to send the bill to the insurance company and stay on top of payment to the provider.
  • You'll also be asked for your insurance card. This will give the staff the information needed to verify your insurance, bill correctly and file a claim on your behalf for services that are provided to you.
  • You may be asked to pay any co-pay due before you leave the doctor or other care provider's office. You may also be asked to pay any co-insurance amount -- as well as payment for any services not covered in your plan.
  • Expect to receive an Explanation of Benefits from your insurance company which details the amount billed for each medical service provided, the amount the insurance company paid, and amount due from you.To learn how to organize bills, see: Keeping Track Of Your Claims For Medical Bills: A Simple Method
  • NOTE: Keep track of your medical expenses. They can be tax deductible. To learn more, see: Medical Deductions.

PPO premiums are less than Fee-for-service premiums because the plan saves money by setting dollar limits in its contracts with health care providers.

Like all types of health plans, there are advantages and disadvantages. For information about the following, click here

  • Advantages: Unlimited Choice of Doctors, Premiums, Limit on costs
  • Disadvantages: Out-of-pocket costs, Paperwork, Benefits

To maximize use of a PPO, consider the following steps, each of which are described in How To Maximize Use Of A PPO: offsite link

  • Keep your i.d. card with you in your wallet or purse.
  • Use in-network doctors and other health care providers as much as possible. If you need emergency treatment or surgery, and a member of the team isn't part of your insurer's network, you may be requested to pay out-of-pocket ("Balance Billing"). There are steps you can take to minimize or eliminate the bill.
  • Keep track of out-of-pocket medical expenses.
  • Negotiate fees with out-of-network health care providers.
  • Avoid paying money in excess of Usual, Customary and Reasonable.
  • Stay on top of insurance company reimbursements.
  • If you have a choice, balance premiums, deductibles, co-insurance, stop loss and benefits. 
  • Examine discounts for healthy living.
  • If you smoke, quit.
  • If you need an experimental treatment, work with your doctor.
  • Don't accept a "no" from the insurance company. Appeal. Be persistent - it pays.
  • Choose doctors and specialists with care, and learn how to maximize limited time with them.
  • Take advantage of your plan's mental health benefits.
  • Learn how to keep your doctor if you change plans.
  • Keep in mind that insurance policies are not set in stone. You can negotiate.

Do whatever you can to keep your health insurance. Health insurance is one of the most important assets you can have. If you have insurance through work, you can continue your insurance through COBRA and HIPAA. (Before automatically exercising an option to continue insurance, compare the coverage and premium to what is available in your state. For information about individual covearge in your state, see: offsite link If you have individual insurance and are having difficulty paying the premiums, see Health Insurance: Financial Assistance To Pay Premiums, Deductibles, Copays, Coinsurance and How To Deal With A Financial Crunch or Crisis

For additional information, see:

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