September 15, 2006, Newsletter Issue #44: Preferred Provider Organizations

Tip of the Week

In a nutshell, a PPO, or preferred provider organization, is a combination of a fee-for-service plan and a Health Maintenance Organization plan. According to the American Association of Preferred Provider Organizations (AAPPO), a PPO is a health care service delivery network in which the providers, such as doctors, therapists, and other allied health care professionals, will enter into a contract to provide care to benefit plan members on a fee-for-service basis. This is in exchange for more patient referrals and more timely payment from the insurer. Less restrictive than an HMO, a PPO allows patients to use any provider in or outside of the PPO. However, there is a financial incentive to the patient to use in-network providers.

The most common incentive is lower co-payments in exchange for using the services of an in-network provider. PPOs generally provide easy access to the caregiver of your choice anywhere. Most PPOs do include some managed care features, such as requiring you to select a primary care provider and seeking prior approval for inpatient admissions. *Since they are a combination of a fee-for-service and a HMO plan, premiums for PPO health insurance generally fall in the mid-range between those for traditional fee-for-service plans and the more highly managed HMOs.

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