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Hassle-Free Health Coverage: Preferred Provider Organizations (PPOS)

Unlike HMOs, PPOs do not utilize primary care gatekeepers. A single physician does not manage an individual's health care services. PPOs -- a cross between regular fee-for-service plans and HMOs -- are designed to provide you with increased benefits if you use doctors and hospitals within its network.

Commercial insurers implemented PPOs as an answer to some of the negative aspects of HMOs, such as a the limited choice of physicians.

A PPO is a nice compromise if you don't want to pay for traditionally expensive fee-for-service coverage, but want more choice than an HMO offers. And a growing number of people are making that choice, according to a survey by benefits consulting firm Foster Higgins.

According to Foster Higgins, employers are continuing to enroll a growing number of workers in managed care plans -- however, only in those plans that retain employee choice of physician. More than half (53 percent) of the nation's employees were enrolled in a managed care plan in 1993, up from 48 percent in 1992 and PPOs captured the largest share of the managed care market, with 27 percent of employees enrolled in 1993.

Small and large employers continue to add PPOs. The number of smaller employers offering PPOs increased from 21 percent in 1992 to 24 percent in 1993. Among large employers, PPOs grew form 33 percent to 36 percent.

Here's how a PPO works. Your insurance company, as they do in HMOs, contracts with certain physicians and provides a preferred provider network of doctors and specialists that you can choose to go to. However, unlike HMOs, you don't have to go to the doctors in the preferred provider network, and you don't have to get referrals from your primary care physician to see a specialist.

However, if you are in a PPO, you will be encouraged to use the preferred provider to keep costs down for both you and your insurance company. If you do, you will pay for services with co-payments, just like an HMO, or you receive a higher coinsurance amount than you would if you used a doctor that is not in the preferred provider organization.

A PPO allows you to choose between cost savings and freedom of choice in selecting a professional.

Example: If Joan used a doctor in the PPO network, she might get 90 percent coinsurance, so she would only have to pay 10 percent of the cost of the medical service, and she would have a low deductible (the part that she must pay first before the insurance company starts paying anything).

Generally, a deductible for PPO coverage ranges between $150 and $300 per year. If you don't use the PPO network often, you might only have 70 percent co-insurance and a higher deductible. That would mean that you'd pay a higher deductible (somewhere between $300 and $500 per year per individual) and 30 percent of costs after that.

PPOs are considered to be closer to indemnity plans than managed care, since the insurance company pays discounted rates for medical services without becoming overly involved in health care decisions about the treatments rendererd.

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