Preferred Provider Organization (PPO)
A health insurance plan that offers lower cost-sharing for in-network providers while still covering out-of-network care at higher cost.
What is PPO?
A preferred provider organization (PPO) is a managed care health plan that contracts with a network of preferred providers — physicians, hospitals, and specialists — and offers policyholders lower copayments, deductibles, and coinsurance rates when they use those in-network providers. Unlike HMOs, PPOs do not require members to choose a primary care physician or obtain referrals to see specialists; members may see any licensed provider, in-network or out-of-network, though out-of-network visits carry significantly higher out-of-pocket costs. PPOs are the most common employer-sponsored plan type in the United States due to their flexibility.
Example
An employee with a PPO plan visits an in-network cardiologist with a $40 specialist copay. Her coworker on the same PPO plan sees an out-of-network cardiologist and pays 40% of the allowed amount after a separate out-of-network deductible — amounting to $340 for the same visit. The flexibility to see any specialist without a referral comes at a higher premium and greater out-of-pocket risk for out-of-network care.
Source: Centers for Medicare & Medicaid Services — Plan Types