A characteristic of a Preferred Provider Organizations (PPOs) is

• A. PPO's operate like an HMO on a prepaid basis
• B. If service is obtained outside the PPO, benefits are reduced and costs increase
• C. PPO's are generally public in nature rather than private
• D. Health care providers themselves are barred from forming a PPO due to conflict of interest

Answer: (B)

PPOs are built around a network of contracted providers who offer discounted care to plan members. The important twist is that you’re not limited to that network—you can see any provider, but the financial benefit is greatest when you stay in-network. When you opt for care outside the PPO network, the plan typically reduces benefits and increases your out-of-pocket costs. This reflects the balance PPOs strike between flexibility and cost control: you can go outside the network if you want, but you’ll pay more for doing so.

For contrast, HMOs are usually prepaid and more restrictive about staying in-network with referrals, public networks are not the defining feature of PPOs, and providers forming a PPO is a normal, intended arrangement rather than a conflict of interest.