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Kids and Health Care: 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 -- which combine some elements of fee-for-service plans and the cost controls of HMOs -- are designed to provide you with increased benefits if you use doctors and hospitals within its network.

Here's how a PPO works: An insurance company contracts with certain physicians to join a "preferred provider" network of doctors and specialists who will treat plan members for pre-arranged fees.

As a PPO member, you're given a list of participating providers. If you use these doctors and facilities, you only have to pay a small HMO-like copayment. However, unlike an HMO, you don't have to go to the doctors in the preferred provider network. But, if you go to a doctor outside of the network, you have to pay larger deductibles and substantial co-insurance (often 30 percent of all fees).

A PPO allows you to choose between cost savings and freedom of choice in selecting a health care professional. It counts on the coverage differences to encourage you to use participating doctors and hospitals.

PPOs are a better choice than fee-for-service plans if you have a big family but you want to have some flexibility in your choice of a doctor. They are also good if you have built a relationship with a physician not in the network and want to continue that relationship. You can still use preferred providers for other services and keep seeing your specialist.

One caveat: PPOs make financial sense when you know you will exceed the deductible amount. Most people with kids will do so, easily. However, if you don't exceed the deductible, you will basically be getting no value out of your insurance because the deductible amount must come out of your pocket before your insurance company starts paying.

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