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- The PPO is a popular form of managed care organization
- It is among the widely used forms in the Obamacare Exchange system
- The PPO offers more flexibility than the traditional HMO
- The PPO allows consumers to decide when to go outside of the network
- Healthcare companies have developed variations on the PPO
Preferred Provider health insurance permits the use of in-network services at an agreed rate and of services outside the network at a lower rate of insurance payment. The out-of-pocket expenses paid for non-network services do not count towards the plan’s out-of-pocket maximum.
Subscribers have more freedom of action than in HMO plans. They do not need permission or referrals to use most network resources. In PPO plans, there are few restrictions on resources and how much clients can use them.
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PPO is Flexible Managed Care
The Preferred Provider Organization is a managed care network of doctors, hospitals, and medical facilities. It includes specialists of many types in a planned arrangement to meet the expected medical care needs of a diverse population in a defined geographic area.
The PPO charges a flat fee for participation in network services against an out-of-pocket maximum for in-network services. The PPO is distinct for its policy of permitting customers to use outside services. In non-emergencies, patients can choose outside resources.
The PPO contributes at a different rate for outside services; its share of insurance payment is much lower for out-of-network resources. The model prefers its resources but does not require them.
PPO and HMO
The owners established the HMO with the idea of controlling costs, limiting co-pays, and avoiding excessive out-of-pocket expenses by limiting services to network resources. The patient gained lower costs and premiums and gave up the right to use resources without referrals, and to get insurance coverage for outside services.
The PPO offered the advantages of network pricing for services but without the need for a primary care doctor.
The patient could decide when and if to use outside resources and incur higher costs. The current trends have HMOs and PPOs merging identities. PPOs are becoming less flexible by restricting some resources and limiting the levels of usage by subscribers.
Some HMOs have a POS option that permits the Primary Care Physician to make outside referrals.
The Forms of Managed Care Organizations
The below-listed items describe the primary types of managed care organizations in the Obamacare system.
- Health Maintenance Organizations (HMOs) offer low premiums and deductibles . They require use of a primary care physician and do not use outside resources.
- Preferred Provider Organization (PPO) offers flexible use of network resources with no primary care doctor, no referrals, and permitting use of outside resources.
- Point of Sale (POS) networks are small and use the HMO-style of referrals. The primary care physician handles requests. Subscribers can use outside sources with coverage when referred by the primary care doctor.
- Exclusive Provider Organizations (EPOs) are often small lean organizations that hold down prices and out-of-pocket expenses by offering in-network services only.
Life without a Primary Care Physician
The HMO requires each patient to have a primary care physician. This doctor is the primary caregiver and must decide when and if to make referrals to specialists in the HMO network.
The primary care physician is in an ideal position to keep a record of the patient’s condition, symptom-free states, and complaints. By making referrals to specialists, he or she can keep track of progress, treatments, and other diagnoses.
From the patient’s point of view, the PCP can be an unnecessary layer of administration and control. The patient may have a strong idea of the course of care he or she wishes to follow. The PPO provides such a structure. The PPO does not use a primary care physician.
The patient is free to use in-network resources, and the insurer will pay at the agreed sharing ratio. Patients are also free to go outside of the network, and the insurance will pay these at a much lower rate of cost sharing.
The Impact of Out-of-Pocket Costs
A qualified PPO policy has a limit in the plan for out of pocket costs. This must be equal to or less than the overall Obamacare limit for any qualified plan. The consumer must pay copays, coinsurance, and deductibles before the insurance company begins to pay the agreed share of covered benefits.
When subscribers to a PPO plan use outside resources, the PPO does not pay as much as it does for network services.
The plan credits network out-of-pocket expenses towards the plan limit amount. It does not credit the consumer’s share paid for outside resources. This means that out-of-pocket expenses can rise and exceed the policy limit.
The consumer decides when to pay more for an outside service, but the amount that they pay does not get them closer to the maximum benefit. After the policyholder passes the policy limit, the insurance company must pay all of the costs,
The Customer Decides When to Pay More
In a given geographic area, consumers may have strong preferences for a particular specialist or medical facility. If the HMO plans in the area do not include that particular resource, then the customer would have to pay the entire charges for using it. In the same situation, a PPO would permit using that particular outside resource, and the customer would pay a larger than usual share of the fees.
The flexible use of outside resources is one of the ways that PPO can be a better solution for a consumer than an HMO. The HMO would require that the customer use its primary care physician, and if the PCP agrees to make a referral, the customer would have to use the in-network resource named by the PCP.
Obamacare and PPO
PPOs are the second most popular form of organization on the Obamacare exchanges. They often have a wide range of participating doctors and institutions. They basically encourage members to use the preferred medical resources and keep the co-pays to a modest level.
Once the deductible threshold has passed, they pay an agreed high portion of the covered benefits. They do not require a primary care doctor or referrals for in-network resources. Customers are free to use network doctors.
The PPO gives customers freedom to decide to use outside resources. The PPO plays coverage but at a much lower rate than when using network resources. The difference shows up as larger out-of-pocket expenses for the patient.
PPO plans do not count the below-listed items to the out-of-pocket maximum
- Bill balances for non-network providers
- Customer share of out-of-network cost-sharing
- Customer spending for non-essential benefits
PPOs Promote Prevention and Wellness
The HMO-style of management took its name from the important goal of health maintenance. The HMO emphasized low-costs and services that promoted wellness. With low costs and low deductibles, the HMO managed care companies sought to make it easy for subscribers to get regular medical care and to healthy.
A symptom-free state was the best time to institute wellness practices like healthful diet, exercise, and regular check-ups.
The Affordable Care Act added essential health benefits. These useful diagnostic and screening services help detect disease in early treatable stages. PPOs follow the principles of the ACA with no cost services for prevention and wellness.
The PPO Needs a Balanced Approach
The major advantages of the PPO are that it does not require the primary care physician to arrange network resources and that subscribers can go outside of the network for services.
When selecting a health insurance policy, consumers can use comparison shopping to find the best fit for their individual or family situation.
Comparison shopping can emphasize particular medical services or expenses and rank plans on criteria that have importance to the consumer.
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