Covered California Certified Enroller Practice Exam

How does a PPO health insurance plan generally work?

1. It only allows in-network service providers

2. It contracts with participating doctors and hospitals

3. Members do not have any out-of-pocket expenses

4. It requires higher monthly premiums without network restrictions

The correct answer is: It contracts with participating doctors and hospitals

A PPO, or Preferred Provider Organization, health insurance plan operates by contracting with a network of doctors and hospitals to provide care at negotiated rates, which benefits both the providers and the members. Members have the flexibility to see any healthcare provider, but they receive greater benefits and lower costs when they choose providers within the PPO network. This arrangement allows for a broader range of choices compared to some other plan types, such as Health Maintenance Organizations (HMOs) that usually require members to stay within their network for care. While it's true that members can access services outside the network, this may come with higher out-of-pocket expenses, as many PPO plans encourage using contracted providers. Therefore, the aspect of contracting with participating doctors and hospitals is fundamental to how PPOs function, providing both a structured network and flexibility for members. Membership in a PPO does not imply that there are no out-of-pocket expenses; typically, members will still have to pay deductibles or copayments, especially when using out-of-network services. Finally, while PPOs may have higher monthly premiums compared to other plan types, the key feature is the ability to choose from a wider array of physicians and specialists, making the arrangement with participating providers essential to the PPO's operational framework.