Preferred Provider Organizations, known as PPOs, are a cross between regular fee-for-service plans and HMOs. They are a nice compromise for people who don't want to pay for traditionally expensive fee-for-service coverage, but want more choice than an HMO offers.
Here's how a PPO works. The insurance company, as they do in HMOs, contracts with certain physicians and provides a "preferred provider" network of doctors and specialists that people insured under the PPO plan can choose to go to. However, unlike HMOs, patients do not have to go to the doctors in the preferred provider network, and they don't have to get referrals from their primary care physician to see a specialist.
However, patients are encouraged to use the preferred provider network because cost control and managed care measures can be used to keep costs down for the patient and the insurance company. If they do, patients pay for services with copayments, as they would in an HMO, or they receive a higher coinsurance amount than they would if they used a doctor not in the preferred provider organization.
Which employees will like PPOs? PPOs are a better choice than fee-for-service
plans for employees who do not make a lot of money but who want to have some
flexibility in their choice of physician. They are also good for people who have
built a relationship with a certain physician and want to continue that
relationship. They may use preferred providers for other services and keep
seeing that one certain specialist who is not in the network for an on-going
problem they have. PPOs are also good for people who know they will exceed the
deductible amount. People who will not exceed the deductible will see less value
in their insurance because the deductible amount must come out of the employee's
pocket first before the insurance payments start kicking in.