PPO - Preferred Provider Organization

What happens is health insurance companies contract a group of doctors and hospitals that will be part of the network of providers for that company. This network of doctors and hospitals then charge a contracted fee for their services and when you choose to see one of these providers, the amount you pay out of your pocket is relatively low.

There is typically a small co-payment (a fee per visit or service), which may be $15 or $20. It is important to remember that since the insurance companies keep prices lower by having a contract with specific doctors and hospitals, there is higher charge for going out of the healthcare provider's network.

The PPO has a more flexible arrangement than many other plans because the plan will pay some of the costs if you choose to visit a doctor, specialist, or clinic outside the network.

A PPO or preferred provider organization is considered a managed care group of doctors and hospitals which have been contracted to provide reduced rates to the group. These groups are contracted to insurers or third party organizations to save both the insurer and the insured money.