Preferred provider organization
A preferred provider organization, or PPO, is a health plan that contracts with doctors, hospitals and other providers to form a network. You generally pay less for covered care from in-network providers and can still use out-of-network providers at a higher cost. The plan sets your deductible, coinsurance, authorization rules and out-of-pocket limits.
Also called: ppo
A PPO gives you a choice each time you need care: stay in the network and pay the lower in-network share, or go outside it and pay more. That flexibility is the main thing a PPO offers, and it is also where the surprises come from. An out-of-network visit can carry a separate deductible, a higher coinsurance rate and a bill for charges above what the plan allows.
How a PPO splits the cost of a visit
The arithmetic starts with your deductible, coinsurance and out-of-pocket maximum. A plan with a $1,500 deductible, 20% coinsurance and a $5,000 out-of-pocket maximum shows how the pieces fit, using example figures from HealthCare.gov (opens in a new tab) for a general health plan, not standard PPO terms. Take a covered in-network service with a plan-approved cost of $125, after the deductible is met:
Hover or tap a row to highlight it.
| Step | Amount |
|---|---|
| Plan-approved cost | $125 |
| Your 20% coinsurance (20% × $125) | $25 |
| Plan pays 80% (80% × $125) | $100 |
| What you owe | $25 |
Before the deductible is met, you may pay the full $125 for a service the deductible applies to. Once you reach the $5,000 out-of-pocket maximum for covered services, the plan pays 100% of covered services through the end of the coverage period, subject to its terms.
Going out of network changes the math. The plan may apply a separate out-of-network deductible or a higher coinsurance rate, and the provider may charge more than the plan's allowed amount where the law permits. The actual payment comes from the policy's out-of-network benefit provisions.
PPO plan designs and what each one changes
No national rule sets a PPO deductible, coinsurance rate, copayment, premium or out-of-pocket maximum. Plans mix and match these features:
- Separate deductibles. The out-of-network deductible may be separate and higher than the in-network one.
- Coinsurance rates. The out-of-network percentage may be higher.
- Fixed copays. A set copay may apply to office visits, specialists, urgent care, emergency care or prescriptions.
- Out-of-pocket maximums. Some plans use one combined annual maximum; others keep separate in-network and out-of-network maximums.
- Referral and authorization rules. Many PPOs allow specialist visits without a primary care referral, but the plan may still require prior authorization for particular services.
- Network tiers. Some plans place preferred providers into different cost tiers, according to HealthCare.gov's definition of a preferred provider (opens in a new tab).
- Limited out-of-network coverage. The plan documents decide whether a given service is covered outside the network at all.
Lower premiums may come with higher deductibles or other cost sharing, but the trade-off is plan-specific.
A PPO sits beside two other common plan types, according to HealthCare.gov's plan type guide (opens in a new tab). A health maintenance organization generally limits coverage to its network except for emergencies and may require primary care referrals. A point of service plan charges less in network and allows out-of-network care at extra cost, but commonly requires a referral for specialists. A PPO generally allows out-of-network care without that referral step.
Where you will see PPO
PPO is a health insurance network and plan-type term. It shows up in individual, employer-sponsored, Medicare Advantage, dental and vision coverage. You will see it on a quote, application, plan comparison, insurance card, Summary of Benefits and Coverage (opens in a new tab), certificate, enrollment materials, renewal notice, explanation of benefits and claim letters. Inside the plan, look at the network provisions, benefit schedule, cost-sharing table, and referral, authorization and out-of-network sections.
Auto, homeowners, renters, life, disability and pet policies do not ordinarily use the PPO label. Workers' compensation can use it separately. New York regulates workers' compensation PPOs under New York Workers' Compensation Law § 353 (opens in a new tab), which requires at least two providers in every applicable specialty and at least two hospitals, subject to a geographic waiver. Under § 354 (opens in a new tab), an injured employee may seek treatment outside the PPO after 30 days from the first PPO visit, subject to the statute's conditions. That workers' compensation setup is separate from a health insurance PPO.
Questions to ask your agent or insurer
- Are my doctor, hospital, laboratory, pharmacy and facility in network for this exact PPO plan and location? Network status can decide the deductible, coinsurance, allowed amount and whether the service is covered.
- What are the in-network and out-of-network deductibles, coinsurance rates, copayments and out-of-pocket maximums? A PPO's out-of-network option can carry very different cost sharing.
- Does this plan cover non-emergency out-of-network care, and is the out-of-network out-of-pocket maximum separate? Some plans limit or exclude non-emergency out-of-network benefits.
- Do I need a referral or prior authorization for a specialist, procedure, hospital admission, imaging or prescription? A PPO label does not remove every authorization requirement.
- How are out-of-network claims calculated, and can the provider bill me above the allowed amount? The allowed amount, state and federal protections, and provider participation all affect the remaining bill.
Frequently asked questions
Short answers to common PPO questions.
Does the out-of-pocket maximum cap every bill under a PPO?
No. Premiums, noncovered services, amounts above allowed charges and some out-of-network amounts may be treated separately under the plan or applicable law. The Summary of Benefits and Coverage shows what counts toward the maximum.
Is a provider in network just because it accepts my insurer?
Not necessarily. Network participation can depend on the specific plan, location, facility, clinician and date of service. Confirm with the plan before treatment, since a directory listing alone does not guarantee payment.
What happens if I skip a required prior authorization?
Failing to get a required authorization can reduce or eliminate payment for the service. Ask which services need approval before scheduling a procedure, admission or imaging.
Why can an out-of-network bill exceed my coinsurance?
Your coinsurance is a percentage of the plan's allowed amount. An out-of-network provider may charge more than that amount, and where the law permits, you can be billed for the difference, according to CMS (opens in a new tab). Ask the provider and the plan for the allowed amount before the visit.