If you ask your friend what kind of health insurance they have, chances are they’ll say it’s a plan they got through their employer.
Research from the Kaiser Family Foundation (KFF) finds that nearly half of covered workers in the U.S. are insured under an employer-sponsored health plan, which is usually a preferred provider organization (PPO) plan.
Let’s take a look at a few of the pros and cons of the most popular choice for health coverage in America—the PPO plan.
What is a preferred provider organization (PPO) plan?
A PPO plan is a type of health insurance plan that contracts with specific doctors and hospitals in order to create a network of participating or “preferred” providers.
Employees covered under a PPO plan need to get their medical care from those doctors or hospitals on their insurance company’s list of preferred providers in order for claims to be paid at the highest level.
Pros of a preferred provider organization (PPO) plan
Let’s start with the good news—there are several advantages to having a PPO plan that make getting care a convenient experience.
Freedom of choice
Given that PPO plans offer an entire network of doctors and hospitals for you to choose from, you have a lot of say in where you get your care and who from. Any doctor and healthcare facility within your insurance company’s network all offer the same in-network price.
What’s more, you don’t have to commit to a single primary care physician. This is especially convenient if you travel frequently and aren’t able to consistently see the same doctor every time you’re due for an appointment.
No referrals needed
Another benefit of not being locked in with one primary care physician means that you don’t need a referral in order to see a specialist. Other plans, such as the health maintenance organization (HMO) plan, would require that you first set up an appointment with your primary care physician who would then write you a referral to see a specialist.
Skipping this step of requesting a referral from a primary care physician saves you the time and money you would spend on the extra appointment, and gets you to the specialized care you need that much faster.
While it’s recommended that you seek care from a doctor or hospital that’s within your network, you can still get the care you need partially covered if you go outside of your network. You’ll just have to pay more additional out-of-pocket costs than you would if you had gotten care from one of the preferred providers.
Other health plans, such as the HMO plan, strictly require that you only get care from medical providers within your network, which means you wouldn’t be able to get any portion of your care covered if you’re out of network. The only exception is in the case of true medical emergencies.
Cons of a preferred provider organization (PPO) plan
Now it’s time for the not-so-good news. Before enrolling in a PPO plan, you’ll want to consider a few disadvantages that may make getting care slightly more costly.
Higher premium costs
Data from the KFF finds that covered workers enrolled in PPO plans have higher average premiums for both single and family coverage than the overall average premiums.
The total average annual premium cost for a single PPO plan is $7,880 and $22,248 for a family plan. In way of comparison, an HMO plan has lower averages of $7,238 for a single plan and $20,809 for a family plan.
With a PPO plan, you’ll have an annual deductible, which represents the money you’ll have to pay out of pocket before your insurance will cover anything. Insure found that deductibles can range from $1,701 to $4,000 for high deductible health plans.
For example, let’s say you have a PPO plan with a $2,000 deductible. If you break your arm in January and are charged a bill of $850, you would have to pay the full $850 out of pocket, because you haven’t paid $2,000 worth of medical expenses that year yet.
Understanding the pros and cons of your health insurance options is an important first step in making the right decision for you and your family. If you need a health plan that gives you more flexibility, and you don’t mind paying a little extra for it, a PPO plan is a good option to get the care you need.