HR Glossary
Preferred Provider Organization(PPO)

Preferred Provider Organization(PPO)

Updated on:
August 22, 2022


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Table of Content

What is Preferred Provider Organization(PPO)?

A preferred provider organization (PPO) is a type of managed care organization. A PPO is a form of managed care, where a select group of providers within a provider network agree to provide services to PPO members at a reduced rate.

Preferred provider organization (PPO) plans are health insurance plans that contract with medical providers, giving members reduced rates for using in-network providers. PPO plans usually have higher monthly premiums and out-of-pocket costs than health maintenance organization (HMO) plans, but offer more flexibility in the types of providers members can see.

What is the difference between PPO and HMO? 

Health Maintenance Organizations (HMOs) are a type of health insurance plan that require their subscribers to consult with a doctor before seeing a specialist.

Preferred Provider Organizations (PPOs) are a type of health insurance plan where subscribers can use any provider or hospital they wish. However, the network providers are chosen by the insurance company.

These plans may cover services that are not typically covered by traditional health insurance. For example, HMOs typically cover routine care and preventative services, while PPOs may cover annual physicals and some elective procedures.

Why are PPO plans necessary?

 PPO plans offer members the ability to see any provider they want, without a referral from a primary care physician. This flexibility is appealing to many people, as it gives them the freedom to choose their own doctor. Additionally, PPO plans often have lower deductibles and out-of-pocket costs than HMO plans.