Definition - What does Preferred Provider Organization mean?

A preferred provider organization (PPO) is a private healthcare insurer that offers preferred provider coverage. When using a preferred provider plan, the insured member may choose any physician or hospital for medical treatment but will pay less out of pocket when choosing a provider within the plan’s network. A preferred provider organization network is designed to offer more health care options to the plan member, but using a provider outside the network will cost the member more out of pocket.

SureHire explains Preferred Provider Organization

A preferred provider organization (PPO) will contract with a number of physicians, hospitals and other health care providers to form what is referred to as a network. If an insured member of the plan chooses to receive health care from a member of the PPO’s network, then the cost of the care will be reduced or the consumer may be charged a lower deductible or fees. The consumer may choose a provider outside of the network but will then be responsible for a greater portion of the costs. Additionally, preferred provider organization plans usually permit consumers to select and receive care from specialists without a referral. This type of plan allows the insured to exercise greater freedom over his or her healthcare choices while providing an incentive for members to use providers within the network who charge less to the insurance company and/or insured company.

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