What is a preferred provider organization (PPO)?

A preferred provider organization (PPO) is characterized by its network of healthcare providers who have agreed to offer services at reduced rates to enrolled members. This network typically includes doctors, hospitals, and other healthcare professionals who agree to adhere to the plan's guidelines for reimbursement. Members of a PPO have the flexibility to choose healthcare providers within this network to receive higher levels of benefits, while still having the option to receive care from out-of-network providers, albeit often at a higher out-of-pocket cost.

This structure promotes a balance between cost savings and flexibility, allowing members to seek care from a variety of providers without needing referrals, which distinguishes PPOs from other types of health plans, such as Health Maintenance Organizations (HMOs) that may require more structured care management.

Options like a government health plan or those requiring referrals typically describe different health insurance models or arrangements, while the option that states no coverage for out-of-network services does not accurately reflect the operation of PPOs, as they do allow for such services, albeit with different cost implications.