PPOs negotiate with medical providers to reduce their charges. The providers in turn, are referred business from the PPO. Often PPOs will negotiate fee reductions in excess of 25%. These reductions are usually reflected in much lower premium rates for PPO plans, relative to the indemnity plans. If buying a medical insurance plan that uses a PPO, check to see if the providers you would like to see are on the provider list of that PPO. If they are, you will usually be better off purchasing a PPO plan rather than an indemnity plan.

PPO plans can immediately save you money, even if you do not meet your plan deductible. Assume you have a $1,000 deductible program, and run up a $1,000 claim. Obviously, the insurance company will pay nothing since you have not exceeded the deductible. However, under many PPO plans, the claim would be discounted by the PPO, and you would only need to pay the doctor $750 (assuming a 25% PPO fee reduction). You would have saved $250 without the insurance company paying anything! The main disadvantage of PPOs is that they usually pay a far lower benefit percentage if you select a provider from outside the network.

Additional Information on Individual Health Insurance

Preferred Provider Organizations (PPOs)
Health Maintenance (HMOs)
Deductible
Family Deductible
Deductible Carryover
High Deductible Plans and Saving Money
Out of Pocket Maximum

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