For the past 20 years, preferred provider organization medical plans (PPOs), have been marketed aggressively by insurance carriers as a good alternative to health maintenance organizations (HMOs). Are they really a good alternative to HMOs? In some cases, they can be – but there is an even better way. Better than HMOs and better than PPOs, which over time have gradually become the new “traditional” healthcare plan.
But first, what does a PPO entail? A PPO is a subscription-based medical care arrangement that has contracts with a network of “preferred” providers from which people can choose. With a PPO plan, it is not necessary to select a primary care physician, which means people under PPO plans don’t need to ask for a referral to see other providers in the network (i.e., specialists).
This is one of the primary reasons PPOs are so popular – but another reason is that patients with PPO plans are only responsible for their annual deductibles and the copayments for their visits. The downside with this arrangement is that obtaining healthcare services from a provider that is out of the network will cost the patient a higher amount, and the out-of-network doctor will need to be paid directly. To get reimbursed, the patient has to file a claim with the PPO. An HMO does not have this type of arrangement.
And that’s not the only disadvantage of a PPO plan. Truthfully, PPOs do not necessarily have the widest networks of providers available to patients – although certainly, insurance carriers frequently represent them that way to the employers they market PPO plans to. The direct contracting model actually can deliver a much wider network of providers, and do it at a much lower cost to the employer.
Hospitals and other healthcare providers no longer give deep discounts to employers with PPO plans – but because they did for years, PPOs skyrocketed in popularity, which is why they are now the new “traditional” plan. We have come full circle, and at the expense of both patients and employers. With the direct contracting model of healthcare, there is a wider network for patients to go to, and lower costs for employers. Both of these things are important features in this new healthcare climate.