 Personal Finance Powerpoint Presentation, Preferred Provider Organization, the PPO. Prepare to get financially fit by practicing personal finance. Remember that insurance is part of our overall risk mitigation strategy, a long-term strategy where we use the adage of measure twice, cut once, putting a formal plan into place, looking something like this. We're gonna set our goals. We're gonna develop a plan to reach those goals, putting the plan into action, and then we're gonna review the results and go through the process again and again periodically. We're looking at the Preferred Provider Organization, the PPO. Most of this information can be found at Investopedia, Preferred Provider Organization, PPO, which you can find online. Take a look at the references, resources. Continue your research from there. This is my Michael Grant updated March 9th, 2022. What is a Preferred Provider Organization, a PPO? A Preferred Provider Organization, PPO, is a popular health insurance plan designed for individuals and families. So remember, when we're talking about health insurance, it's similar to other kinds of insurance. However, it's a bit more complex due to laws, regulations, and just the health industry in and of itself being complex. So now we're going through the different kinds of plans and putting those into basic groups, which could help us to make the decisions among them. So the PPO's involve networks that are made up of contracted medical professionals and health insurance companies. Healthcare facilities and practitioners known as Preferred Providers. So when you hear the term Preferred Providers, you can hear that double P. That's one way you might try to remember it as a term that might line up more to the Preferred Provider Organization, the PPO. They offer services to the insurers plan policy holders at reduced rates. Plan participants receive the maximum PPO benefit when they visit in-network healthcare professionals and are also offered coverage when they see out-of-network providers. So you've got that in-network type of situation where that's where you get the most benefit because the network, if they're within the network, that's where you're gonna get the lowest amounts that you'll have to pay generally, but you still have some flexibility to get those out-of-network providers, the PPO's typically thought to be possibly more flexible than other types of plans. So how Preferred Provider Organizations work? So this is the PPO's. A Preferred Provider Organization is a managed care network consisting of medical professionals and facilities, such as primary and specialty physicians, hospitals and other healthcare professionals who contract with insurance providers to render services to subscribe participants. So you've got this network that is being set up through the contracts that are working within the organization of the PPO's. So these are plan participants or consumers who are covered by the insurer's healthcare plan. So plans negotiate fees and schedules for services with healthcare professionals and facilities. As such, the agreed upon rate is typically lower than their usual charges. So that's gonna hopefully help to lower the cost here because they've got the networks and the plans and so on in exchange for reduced rates, insurers pay the PPO a fee to access the network of providers. So you're paying for the access to the network of the providers, which hopefully you can get access to within the network and be participating possibly in the lower rates than you otherwise would. The PPO participants are free to use the services of any provider within their network. So clearly you still got this network thing going on. So they are encouraged but not required to name a primary care physician. So that primary care physician is really important in some types of plans. You still can have it here because it can be useful to have the primary care physician as your point person that can then point you to the specialists that you need. So it's kind of a nice way to go if you can trust that main person as the director of where you're gonna go to find the needs you need. So and don't need referrals to visit a specialist, but you don't need it's not as required in the PPO here. So subscribers may go out of network for coverage, but it often comes at a higher cost. So you still got the network situation, flexibility within it, but it could cost more if you're outside of it. More information on costs is explored below. So we got the special considerations. As noted above, there are a number of costs associated with PPO's and premiums tend to be higher than other types of insurance plans. So that with that more flexibility that is generally with the PPO's comes with a higher cost or the higher premiums as well. So you got the pros and the cons. PPO plans tend to charge higher premiums because they are costlier to administer and manage. Participants are generally responsible for copayments which are paid directly to the provider at each visit. So you got that copayment kind of situation when you've got the normal visits. Remember when we talk about insurance with health insurance a little bit different possibly than other types of insurance like property insurance in which case you're usually trying to insure against like some big event that you're hoping doesn't happen but might happen and could be financially problematic such as a house burning down with the medical insurance. You still could have that big event that hopefully doesn't happen but you wanna be insured against but you also have the more day to day kind of routine maintenance type of stuff. The routine body maintenance kind of type of stuff that could be covered by insurance as well and that's where the copay kind of situation could come into play. So there are also deductibles that patients must meet before the plans start kicking in and paying claims in full. So you got that deductible situation which is a traditional kind of insurance kind of situation which you would kind of expect if you're trying to insure for a classical reasons against the big event that could happen. Then you might say, hey look if I get a disease or something I can pay up to a certain amount. I could pay a few thousand dollars or something be okay but if it starts going above that which is clearly obviously good then the insurance would kind of kick in. So it depends what you're looking for with regards to whether the deductibles could be good or bad because you can imagine there would be interplays with the relation of the deductible, how high it is and the cost of the insurance that is being purchased, the premiums. So as noted above, planned participants are also allowed to visit out of network facilities usually at a higher cost. These charges are based on a reasonable and customary fee schedule claims made by these healthcare providers exceed the reasonable and customary fees for services rendered coverage may not apply or most commonly the excess charge is passed on to the patient. So one important point to note is the degree of flexibility associated with the higher costs of the PPO's. These plans offer more options than others available on the market. So that's generally the trade off higher costs more flexibility. PPO networks are typically large with providers in many cities and states choosing a provider or accessing one in urgent situation provides value to participants. So clearly especially if you're moving around and you're not don't have access to your local network it could be easier or better in those situations if you had access to people outside the network at that point. So preferred provider organization, the PPO or health maintenance organization, the HMO in contrast to PPO's health maintenance organizations those are the HMO plans. These are the ones that we usually do the comparing and contrasting between they require the HMOs require participants to receive healthcare services from an assigned provider. So they're more restrictive. This is a primary care doctor who coordinates the insured's care. So you got really more of a point person that's going to be coordinating where you're going to be going and be more there's more restriction in terms of who's going to be directing that you got to assign the primary care provider who's going to be directing your health orchestra. So with programs allow the insured to seek specialist care but under an HMO plan the designated primary care physician must provide a referral to the specialist. So you got to get the primary care person to say, hey, I recommended this person for help. As noted above the PPO plans charge higher premiums than almost every other plan for convenience, accessibility and freedom they offer. So there's the exchange cost versus the flexibility. This includes a wider choice of hospitals and doctors plans with the lowest fewest out of pocket expenses such as those with low deductibles and low co-payments have higher premiums. The elevated premium cost is due to the insurer absorbing more of the associated costs. Conversely, lower premium alternatives translate into higher out of pocket costs for insured and lower costs for the insurer. So you can imagine these relationships between the pros and the cons between the two are predictable from a market sense, right? More flexibility than higher costs, less flexibility, lower costs. The amount of cost that's gonna be there when you go to the normal doctor visits and so on if it's higher, then you would think that that would lower the premium amount and vice versa. So you've got the relationship that you would kind of expect given the fact that we have a market here and we have these different factors involved. So PPO plans come with more comprehensive coverage including many services that other managed care programs might exclude or for which they would charge an additional premium. So that's nice, you have the wider coverage too. That could be good. PPO plans have historically been the preferred choice among employer group participants. However, today, participants want more options for managed health care. Therefore, many employers offer HMO plans as well because HMO premiums are less expensive. Some participants favor the HMO plans for their affordability although services and freedoms typically associated with the PPO plans are often restricted. How do PPO deductibles work, you might ask. A health insurance deductible is an amount you must pay out of pocket for medical services each year. So that deductible is like the classical kind of insurance thing we typically think about. So if there's a problem that happens and there's a deductible, then you've gotta pay the deductible if it goes over above the deductible, that's when the insurance kicks in. That's a really good kind of system if you're able to basically self-insure up to the point of the deductible and you're talking about something that doesn't happen all the time. You're trying to insure against a tragic event or some costly event that's not likely to happen, then that kind of structure with a deductible tends to make sense. But obviously you got that interplay with a higher deductible than the lower the premium you would think might be, but then you gotta deal with the high deductible. So after you've met it, your insurance coverage kicks in. PPO plans may have two different annual deductibles. One applies to providers in the PPO network. The other, usually a larger sum, to providers outside the network. The latter is larger because the PPO wants to encourage you to stay in network using its preferred providers. So if you go outside the network, they hit you with the penalty of possibly a higher deductible that you have to pay before the insurance kind kicks in. So what are disadvantages of the PPO plans, you might ask? PPO plans tend to be more expensive than other managed care options. And that's obviously a downside given the cost of the health stuff in the first place. They typically have higher monthly premiums and out-of-pocket costs like deductibles. You often have both co-insurance and co-pays. So you gotta deal with the both of those ones. This is the trade-off for the flexibilities PPO provide of letting you use providers both within and outside the PPO system without needing referrals. The cost for co-insurance and deductibles can be different for in-network and out-of-network providers and services. Some might find it onerous to have more responsibility for managing and coordinating their own care without a primary care doctor. In other words, that point person can be kind of good if you're saying, hey, I want the primary care person to be pointing me where I need to go as opposed to someone else that might be saying, I want to make more of the decisions or have more flexibility myself. So what is the difference between a PPO and a POS? So now we've got this kind of hybrid thing. We've got the POS. So the biggest difference between a PPO and a POS plans is generally flexibility. Both plans cover you whether you use providers and facilities in or out of network. However, the POS requires you to have a primary care physician and get referrals from them if you want to see a specialist or anyone else. So you still got that kind of point person. The PPO's don't. So costs are another consideration. The PPO's tend to be more expensive than the POS plans. The premiums are higher and they usually cost come with deductibles that must be met before your coverage begins.