The Advantages & Disadvantages of PPOs

The Advantages & Disadvantages of PPOs

Preferred Provider Organizations (PPO’s) are Managed Care Organization (MCO) that contract with a network of doctors, hospitals, and other health care providers. This agreement allows treatment at a reduced cost.  In other words, Preferred Provider Organizations offer discounts to visit health care providers, within their provider’s network.

Two most important characteristics of PPOs are:

  • The first important characteristic of PPO is that it allows its plan members to visit any doctor or hospital without referrals from the members’ Primary Care Physicians (PCP). In other words, it is just opposite to another popular type of managed care plan, HMO (Health Maintenance Organization), which needs referrals from a PCP.
  • Another appealing characteristic is the flexibility to visit or choose doctors and hospitals outside the network. But it also has some limitations—visits outside the network are not fully covered as visits within the network; thus require higher payments from patients.

Despite of above mentioned facts, both these characteristics (no need to referrals and flexibility to choose outside the network) are very appealing to many employees. So, if you wish to avail any of these appealing characteristics, then it’s worth your time to consider PPO as a part of your health benefit package.

In sum, PPO’s are virtually having all the advantages of managed care health insurance and fee-for-service health insurance. The only disadvantage is that you must have to pay full rate for physicians and hospitals outside the network. So if you agree to pay for your choice, then PPO’s are the best option for you.

Points To Be Considered:

Checking and evaluating the network of doctors. When evaluating a Preferred Provider Organizations network, first ask about the company’s screening process, when signing up any physicians to its team.  It should include background checks and any prior malpractice cases.

Another important point is to examine the policy carefully (don’t hesitate to ask as many questions as possible to clarify your doubts). Because there are many insider secrets; like the flexibility to choose any physician outside the network, often misguides plan members into a sense of false security. If the network is not up to the mark, people feel they can simply go outside the network for care. But in practice, many PPOs make it impractical to obtain care outside the network by setting high deductibles and co-insurance. So it’s better to check first.

Advantages and Disadvantages:


  • PPO’s allow you to see any doctor or facility in their network without obtaining a referral. Additionally, out-of-network benefits allow you to see providers not in the network, but at a higher cost to you. This is important if you frequently travel outside of the provider area. The major advantage of a PPO is doctor-selection flexibility, which is not allowed in HMO’s.
  • PPO’s networks are much larger that HMO’s networks
  • You may choose specialists directly as you do not have to go through a Primary Care Physician (PCP).
  • You can make your own healthcare decisions
  • You may be admitted to any hospital or facility of your own choice.


  • You must pay full rate for physicians and hospitals outside the network
  • If the network is not up to the mark, people feel they can simply go outside the network for care. But in practice, many PPOs make it impractical to obtain care outside the network by setting high deductibles and co-insurance.

Some policies limit out-of-network coverage to specific health conditions, or set artificially low limits on the maximum payment. As with any health insurance policy, you should look for coverage with at least a $1 million maximum payout.


  1. I am ALWAYS required to obtain a referral to ANY physician that resides outside of the one network I use most frequently. The reports that claim a referral is NOT required are in error.

  2. How do I know what doctor/specialist is in network. I have trigger finger what hand doctor takes my insurance?

  3. I’ve been on Medicare Advantage for eight years. Nobody “sold” me anything; I just researched my options online. There are no additional premiums for Medigap or drugs. The network includes every provider I’ve ever heard of except one. Co-pays are reasonable. It’s probably the best insurance I’ve ever had.

  4. I worked for doctors for a very long time. And every one of them told me “If you can afford it, never give up your Medicare”.

  5. Just turned 65 in Feb, went on a Medicare advantage plan because I received the “extra help” from Medicare for prescription drug coverage. So far, my plan has cost me $1400 for medical expenses, and has denied 3 prescriptions. Two months in and already a disaster. I’m changing to supplement G and a drug plan this week. BTW the extra help hasn’t helped at all.

  6. My wife and I have had an advantage plan for 5 years. We love it! It is not an PPO and we receive many benefits that we would not have with Medicare. Example: Dental, Vision, Spa Membership, no monthly premium, over the counter allowance for medical supplies etc. etc. All our doctors and hospitals are covered, and it also has out of town coverage. The regular Medicare plans are very expensive. For us the advantage plan PPO is the way to go.

  7. An advantage plan operates like a regular insurance plan most people have already. People do just fine on the Advantage plan and don’t have to pay a monthly premium for a supplement. Being on the hook for 20% or paying for a supplement isn’t possible for everyone.

  8. How much does the PPO pay? Do they pay 80% and we pay 20%?


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