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Preferred Provider Organization (PPO)
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The idea of a preferred provider organization is that the providers will provide the insured members of the group (or individual members of the health plan book of business) a substantial discount below their typical rates.
Unlike the HMO, in which insureds, who do not utilize members of the organization for healthcare, receive little or no benefit, PPO members will be reimbursed for services performed by non-preferred providers, albeit at a reduced rate which may include higher deductibles, co-payments, lower reimbursement percentages, or a combination of the above.
The rise of PPOs was credited by some with a reduction in the rate of medical inflation in the U.S. in the 1990s.
