Texas General Lines — Life, Accident, Health and HMOGeneral InsuranceMedium
A small business owner is looking for a group health insurance plan that allows employees to choose their own healthcare providers without needing a referral, while still encouraging the use of in-network providers through financial incentives. What type of plan would best suit these needs?
- AExclusive Provider Organization (EPO)
- BHealth Maintenance Organization (HMO)
- CPreferred Provider Organization (PPO)
- DPoint of Service (POS)
Show answer & explanationAnswer & explanation
Correct answer: C. Preferred Provider Organization (PPO)
A Preferred Provider Organization (PPO) plan offers flexibility, allowing members to choose any provider, but incentivizes using in-network providers through lower out-of-pocket costs (e.g., lower deductibles, copayments, or coinsurance). Referrals are typically not required.
Why the other options are wrong
- A. EPOs are similar to PPOs but generally do not cover out-of-network care, except in emergencies.
- B. HMOs require members to choose a Primary Care Physician and get referrals for specialists; out-of-network care is generally not covered.
- D. POS plans combine aspects of HMOs and PPOs, often requiring a PCP and referrals for in-network care, but allowing out-of-network care at a higher cost.
Preferred Provider Organization (PPO)
A type of managed care health plan that allows members to choose any provider but offers financial incentives to use providers within a network.
- No gatekeeper (PCP referral not required).
- Higher cost for out-of-network care.
- More flexibility than an HMO.
Memory trick: PPO: Pick your doc, pay less in-network.