Preferred provider organizations (PPOs) generally offer a wider choice of providers than HMOs. Premiums may be similar to or slightly higher than HMOs, and out-of-pocket costs are generally higher and more complicated than those for HMOs. PPOs allow participants to venture out of the provider network at their discretion and do not require a referral from a primary care physician. However, straying from the PPO network means that participants may pay a greater share of the costs.
For example, a PPO available to small businesses may reimburse 60% of out-of-network costs and 80% of in-network costs (with the employee responsible for the remaining 40% or 20%). These percentages may be applied to full charges (“sticker” prices), discounted fees that the health plan has negotiated with providers (“negotiated fees”), or regional average fees (“allowable” or “usual and customary” amounts). Keep in mind that this example is one of many possibilities—in-network and out-of-network coverage can differ from plan to plan.