How does a PPO health plan work?
PPO based health plans are a style of plan that we have been using for a couple decades now. They came about after the advent of HMO plans when folks wanted to go back towards the flexibility of traditional indemnity coverage while utilizing networks for cost savings. PPOs are a form of “Managed Care” under which most folks find themselves today.
A couple decades ago the original health insurance coverage was based on indemnity coverage scheme where your paid a deductible and cost shared all approved care costs. This continued until a maximum out of pocket level at which point the insurance company paid all additional approved costs. Some items of course were excluded from insurance coverage. Some limits were placed by the carrier on the amount they would pay for particular procedures but the amounts were in line with what most physicians charged so that was usually not an issue.
Along came HMO plans. This was the big change towards the world of Managed Care. Managed Care was implemented to help control healthcare costs which began getting out of control a few decades ago. There are two reasons we see costs increase, first is new technology that costs more money, and secondly is the increase in prevalence of many illnesses.
The other thing managed care introduced was a greater focus on remaining healthy. Many studies indicated remaining healthy was less costly than just treating sick people. The advent of managed care also began in some cases to introduce shared risk arrangements where providers began to receive set payments to maintain the health of and treat illnesses of patients who selected them as the primary care provider, or group of providers. These risk sharing groups exist still today.
The true HMO plans required use of only the HMO network providers. Areas where this started quickly found discontent with the idea of having very restricted provider networks. Thus, plans were modified to offer the option of coverage, although limited, for care outside the network. These new plans were the original PPO plans. In network care was covered primarily after the payment of co-payments for doctor care, while out of network care required a deductible and then cost sharing. But the out of network care had insurance dollars paid when the deductible was met.
A PPO plan is called such as the name comes from Preferred Provider Organization plan. The key elements are a provider network and differential member cost sharing for in-network and out-of-network care. Also still present is the push for preventive care and maintain health instead of just seeking care when sick. Thus there are usually (and this changed again with the advent of healthcare reform) no or very low cost benefits aimed at annual well person check-ups and well baby and well child care.
The PPO plans we have today are pretty much the same as the older PPO plans. They are designed to emphasize the use of In-Network providers. In fact many now have out of network costs that are two to three times the in-network costs, and the deductibles are not shared in any way, so use of mixed in and out of network care can really add up to become very costly. Thus the provider networks are one of the key elements that differentiate one insurance
carrier from the next. Some networks even contain inner-networks where a fewer number or providers are used to ensure the most cost effective care is rendered to the members.
Overall the workings of a PPO network can be summed up pretty simply. To achieve maximum benefit for the care received, use of in-network providers for care is key. Coverage will be governed by the certificate of coverage which will define what Medically Necessary and will be covered.
One part of the process for medically necessary care is a precertification and authorization process depending on the kind of care needed. Most medically necessary care can simply be obtained, but more complex and/or expensive care undergoes further review. Usually it’s very simple and approved without hassle and based on provider participation agreements with the insurer this is conducted by the treating physician or facility.
The precertification and review process happens to minimize unnecessary procedures that drive up overall care costs for everyone. Once care is received there is a secondary review at the time of claims payment again to ensure the care received was appropriate for the diagnosis. Also, within claims processing there are checks and balances to make sure that services provided have claims from all appropriate providers involved with the care. This is done to minimize fraud.
When all is said and done the PPO plan is the currently most popular kind of health plan. PPOs are generally speaking a fairly simple kind of health plan to navigate. Out-of-network care increases out of pocket costs. Additionally insured persons can end up having to ensure all approvals required are obtained ahead of the care when using out of network providers. Lack of authorization can lead to higher cost shares or even no coverage at all.
Emergencies are exempted from the prior authorization requirement. As long as you follow the rules, PPO plans will work well for most consumers. Generally for emergency care any provider will be paid all medically necessary amounts above the co-payment or deductible and co-insurance depending on plan design. Typically only the in-network deductible is applied.
PPO plans serve to help control healthcare costs by contracting providers to give discounts for the provider being in the network. Additionally, the claims process works to cut the amount of medical care billing fraud which can add lots of costs to the healthcare system. The PPO plans further help to eliminate fraud by requiring pre-certification for some procedures to help ensure they are only provided where medically justified, this also saves plan members from undergoing questionable and in cases unnecessary procedures. Overall it is pretty simple pick network providers and get care as needed and the carriers will provide the checks and balances. In some cases they will even call members to recommend additional care based on known medical conditions to help cost effectively control the medical conditions.
Here is a great resource for those working to pick the appropriate insurance in Texas. A great broker with extensive healthcare and insurance knowledge is worth their weight in gold, especially when the cost to the consumer for the health plan is the same with or without their help. The insurance company pays the broker for their services.
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