A Preferred Provider Organization is a form of managed care closest to an indemnity plan. A PPO negotiates arrangements with doctors, hospitals and other providers who accept lower fees from the insurer for their services. As a result, your cost-sharing will be lower than if you go outside the network of providers.
If you go to a doctor within the PPO network, you will pay a copayment (a set amount you pay for certain services — say $20 for a doctor or $10 insurer may reimburse you for 90 percent of the cost if you go to a provider within the network. If you choose to go a provider out of the network, the insurer might only reimburse you for, say, 70 percent of the cost.
In addition, with an out-of-network provider, you must pay the difference between what the provider charges and what the plan pays.
Another characteristic of PPOs is the ability to make self-referrals. In essence, plan members can refer themselves to doctors of their choice, including specialists, inside and outside the network. However, as described above, plan members may incur additional charges for using out-of-network providers.
