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Understanding PPO Health Insurance

Understanding PPO Health Insurance

PPOS, or preferred provider organizations , can be very inexpensive and offer significant health coverage and options similar to HMOs. However, a primary difference between HMOs and PPOs are deductibles and the concept of in network and out of network providers.

The basics of a PPO is to connect a large portion of different medical providers to provide a variety of different medical services for PPO plan members of the health insurer. The collection of providers is what she is referred to as in network services. This is important because the health insurer has negotiated allowed rates with the providers in order to keep costs down. The more members a health insurer has the better the rates they can negotiate for its plan members.

Health insurance costs are also kept down by requiring a deductible for plan members which must be met before any type of reimbursement kicks in for treatments or services. The deductible is a means of making the patient aware of the cost of services as part of the decision-making process and deciding whether or not treatment should be considered. By combining deductibles with negotiated rates premiums can be kept as low as possible which allows more individuals to sign up for the various PPO health care plans.

Hopefully, there are enough negotiated contracts with a significant portion of providers that plan members will have a large variety of different physicians and specialists from which to seek treatment. If however you have a favorite physician who is not part of the PPO network they would be considered out of network. Any services rendered by physician or specialists outside of the network will be paid 100% by the patient. Paperwork can usually be submitted for reimbursement but many PPOs encourage a network use of physicians and specialists. There could also be a significant delay in reimbursement which should also be considered.

The nice thing about a PPO is that co-pays are often in the $10 to $20 range and patients can go directly to a specialist without prior authorization from the health insurer. Also, because of the negotiated rates, prices for procedures and services will often be significantly lower than the base rate of the provider.

An important factor in choosing a PPO though is the deductible. Deductibles must be met before the percentage reimbursement in allowed for services rendered. An example of this would be $1000 CT, or X-Ray Computed Tomography, which may have a negotiated rate of $800 but the patient has a deductible of $500. Even though there is a $200 savings on the CT from the negotiated rate a $500 deductible must still be met before the health insurer will reimburse the patient. So the total cost to the patient would be $500 plus $300 at a reimbursement rate of 80 20. That means of the remaining $300 the health insurer will pay 80% and the patient will pay 20% or $60.00. So the total cost of the patient should roughly be about $560.

PPOs can be great health plans in terms of low co-pays, low monthly premiums , and the freedom to see any physician or specialists with in the PPO network. But if you see an out-of-network health provider or have a prohibitively high deductible, the savings may not be enough depending on your needs. As always, ask lots of questions and read all health plan materials to make sure you're choosing the health plan that is best for you.

Image by: Adrian Boliston