What is a preferred provider organization (PPO)?  The hallmark of preferred provider organization plans is flexibility. This form of health insurance allows you to see any doctor at any time--you can see a specialist without a referral and you have the option to get health care services from out-of-network providers.

The advantage of staying in-network

With managed care plans, such as preferred provider organization (PPO) plans, health insurance companies enter into contracts with certain doctors, hospitals and other health care providers, at discounted rates. The health professionals who agree to the negotiated rates are "preferred" or in-network providers.

Generally, your health care costs are lower if you use an in-network provider. For example, the LIFE Foundation notes that you'll typically pay a fixed fee, such as a $25 copayment, for health care services you receive from preferred providers.

Flexibility to see out-of-network providers

PPOs also give you the option to receive health care services from doctors and hospitals that aren't part of their list of "preferred" providers. So, if you really want to see a specialist your doctor recommended, but the provider isn't part of your insurer's network, you can still receive coverage for that visit. However, venturing out-of-network usually results in higher costs.

Depending on your health plan, your insurer may pay 70-90 percent of your bill from an out-of-network provider. The remaining amount, called coinsurance, is your responsibility. In addition, you are generally required to make your copayment and you may also have to meet a deductible.