What Is a Traditional PPO Health Plan?

A Traditional Preferred Provider Organization (PPO) health plan is a common health insurance option. These plans balance flexibility with cost management. They also provide access to a wide array of medical services and providers.

Understanding a PPO Plan

A PPO plan is a type of health insurance that establishes a network of healthcare providers. This network includes doctors, hospitals, specialists, and other medical facilities that provide services at negotiated rates. PPOs incentivize members to utilize “preferred” providers within this network.

While a PPO plan encourages members to stay within its network for cost savings, it does not strictly mandate it. Members have the flexibility to seek care from providers outside the established network. However, choosing out-of-network providers typically results in reduced coverage, meaning the member will incur higher out-of-pocket costs compared to receiving care from an in-network provider. This design offers broader access while guiding members toward cost-effective options.

How PPO Plans Work

PPO plans provide access to a broad network of healthcare professionals, offering members flexibility in choosing providers. Members can select any doctor or specialist without a referral from a primary care physician (PCP), whether in-network or out-of-network. In-network providers have pre-negotiated rates, resulting in lower costs for the insured.

A deductible is the initial amount an insured individual must pay for covered medical services before the health plan begins to contribute to the costs. For instance, if a plan has a $1,500 deductible, the member pays the first $1,500 of eligible medical expenses for the year before the insurance coverage starts. This amount restarts at the beginning of each policy year.

Copayments are fixed amounts paid by the insured for specific services at the time of care, such as doctor visits or prescription drugs. These fixed fees might apply regardless of whether the deductible has been met for certain services, or only after the deductible is satisfied for others. For example, a visit to a primary care doctor might incur a $30 copay, while a specialist visit could be $50. Copay amounts can vary for different services or types of prescriptions, with generic medications often having lower copays than brand-name drugs.

Coinsurance represents a percentage of the costs for covered medical services that the insured pays after the deductible has been met. For example, a common coinsurance split is 80/20, where the plan pays 80% of the covered cost, and the member pays the remaining 20%. If a medical service costs $1,000 and the deductible has been met, with an 80/20 coinsurance, the member would pay $200. This cost-sharing mechanism applies until the member reaches their out-of-pocket maximum.

The out-of-pocket maximum is the highest amount an insured individual will pay for covered healthcare services within a policy year. Once this limit is reached, the health plan covers 100% of all additional covered medical costs for the remainder of that policy year. This maximum includes amounts paid towards deductibles, copayments, and coinsurance. For instance, in 2025, the out-of-pocket limit for Marketplace plans cannot exceed $9,200 for an individual or $18,400 for a family.

When care is received from an in-network provider, deductibles, copayments, and coinsurance are usually lower due to negotiated rates. Conversely, seeking care from out-of-network providers generally results in higher deductibles, copayments, and coinsurance percentages, leading to greater out-of-pocket expenses for the member.

Comparing PPO Plans with Other Common Health Plans

PPO plans differ from other common health insurance models, particularly Health Maintenance Organizations (HMOs), by offering broader access to providers. Members can see any doctor or specialist without a referral, whether in-network or out-of-network. This contrasts with HMOs, which typically restrict coverage to a more limited network, requiring members to select a primary care physician (PCP) to coordinate all care.

With a PPO, members do not need a referral from a PCP to see a specialist, providing direct access to specialized care. HMOs generally mandate a referral from the PCP before a member can consult a specialist, guiding care within their established network.

PPO plans offer some coverage for services received outside their network, though at a higher cost through increased deductibles, copayments, and coinsurance. HMOs typically do not cover out-of-network care, except in emergencies, meaning members usually pay the full cost. This flexibility often comes with higher monthly premiums compared to HMOs.

Point of Service (POS) plans share flexibility with PPOs but incorporate HMO elements. POS plans may offer out-of-network coverage but often require members to choose a PCP for referrals, especially for out-of-network services. PPOs do not require a PCP or referrals. While PPOs prioritize flexibility, POS plans often balance cost and choice, sometimes resulting in lower premiums.

Exclusive Provider Organization (EPO) plans are more restrictive than PPOs. EPOs limit coverage to in-network providers, with no coverage for out-of-network services except in emergencies. Unlike PPOs, which allow out-of-network care at a higher cost, EPO members must stay within the network. Both PPOs and EPOs do not require referrals to see specialists, offering direct access within their networks. EPOs often have lower premiums than PPOs due to their confined provider options.