Understanding PPOs

By Alden Smith

HMOs - PPOs - Self Directed Health Plans - Choosing the Right Plan

A PPO, or Preferred Provider Organization, is a health plan that gives the insured a higher rate of benefits when they use the preferred health care providers in the PPO network. This group of health care providers, including physicians, hospitals, clinics, and other health care personnel, contract with an insurance company to provide medical care to the people that are insured through the PPO.

Generally, people that are insured through a PPO will pay a co-payment at time of service, such as a routine doctor's visit. Typically, the person having PPO coverage pays a yearly deductible for health services, which must be paid before the insurer begins to pay medical fees. When the deductible is reached for a given calendar year, the insurer will pay up to 80 percent, depending on the plan, of all medical fees provided by an in-network doctor or hospital. The insured is then responsible for the remainder of the bill.

PPO's have the flexibility of allowing the insured to use out-of-network doctors if preferred by the patient. Unlike an HMO plan, no permission or referral is required for the patient to do so. However, if seeking an out of network doctor, the patient will pay a higher fee, and the percentage that the insuance company pays will be lower. Stated simply, the insured has the choice of doctors, but must be willing to pay a higher fee if using health care providers out of network. This option gives people more flexibility in seeking medical care, but also encourages them to use doctors and physicians that are in the PPO network.

Much like HMO's, PPO's use utilization and case management to maintain the wellness of its members. Coordination of care to the insured is aimed at not only meeting the patient's needs, but to insure cost of services is kept down to an acceptable level. According to a John Hopkins study in 2005, more than 133 million Americans had one or more chronic diseases, which accounted for 83 percent of all health care spending. The PPO uses utilization to insure that these chronically ill receive not only the best of care, but also that they do not receive overlapping treatments and services, such as duplicate testing, unnecessary procedures, conflicting doctor opinions, and possible drug interactions that may prove harmful to the chronically ill.

Case management services, also a large part of HMO practice, are also important to the success of the PPO. It allows the PPO to coordinate, assess, plan, and advocate for options for the client base. The URAC (Utilization Review Accreditation Commission) conducted a survey in 2005 which shows that about 90 percent of the responding companies worked directly with care providers, about 60 percent conducted on site reviews, and approximately 38 percent did in-home visits and reviews with chronically ill patients.

A new trend in PPO's is shifting towards not only utilization and case management, but to disease management services. Some of the diseases covered include asthma, congestive heart failure, coronary heart disease, chronic obstructive pulmonary disease, and high risk pregnancies. Various intervention practices include a telephone hotline, call centers, personal education, and now even Internet intervention. According to the URAC survey of 2005, this trend rose from 31 percent in 2001 to 62 percent in 2005, and is still growing. This offers the client the ability to coordinate both case management and disease control using one nurse instead of multiple care providers, and keeps all their records and information in one place through various electronic interfaces, such as computer networks.

PPO's are an excellent choice in health care, as they provide the opportunity to seek health care from non-PPO physicians. There is, however, a strong financial incentive to use the doctors in the PPO network. Typically, a non-PPO doctor would receive approximately 60 percent of reimbursement, leaving the client with the remaining 40 percent to pay out of pocket. Most PPO members choose not to go to out of network doctors because of the increased cost.

PPO's are not without disadvantages, either. If your lifetime doctor is out of network, and your preference is to continue to see him, then of course you would be stuck with the extra financial burden. And PPO's require a ton of paperwork to be dealt with to insure that financial obligations are met. Copayments with PPO's are typically higher than HMO's, and you may have the disadvantage of meeting a deductible before your benefits kick in for the calendar year.

HMOs - PPOs - Self Directed Health Plans - Choosing the Right Plan

Alden Smith is an award winning author and regular contributor to DoItYourself.com. He writes on a variety of subjects, and excels in research.

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