What is a "preferred provider organization" (PPO)?

A preferred provider organization (PPO) is characterized by its network of preferred healthcare providers that have agreed to offer services at reduced rates to its members. This arrangement allows individuals to have the flexibility of choosing healthcare providers and specialists within the network, often resulting in lower out-of-pocket costs. At the same time, a PPO policy still permits members to seek care from out-of-network providers, although doing so typically incurs higher costs compared to utilizing in-network services.

PPOs are designed to encourage members to seek care from network providers while allowing the freedom to go outside the network when necessary, although at a higher cost. This balance provides both flexibility and cost management, making it an attractive option for many individuals seeking health coverage.

The other options do not accurately represent the defining characteristics of a PPO. For instance, a plan with no restrictions on provider choices describes a type of plan, but not specifically a PPO. Additionally, plans that cover only urgent care services or require referrals to see specialists would be referring to different plan structures, such as Health Maintenance Organizations (HMOs) or other limited benefit plans.