Under a Preferred Provider Organization (PPO), which statement is true?

• A. PPOs operate like an HMO on a prepaid basis
• B. If service is obtained outside the PPO, benefits are reduced and costs increase
• C. PPOs 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 give you access to a network of contracted providers with discounted rates, but you can still use out-of-network providers. The benefit structure is designed to reward staying in-network, where you pay less due to the negotiated rates and lower out-of-pocket costs. When you choose care outside the PPO, the plan typically reimburses at a lower rate and you may be responsible for a larger share of the bill, leading to higher overall costs. This flexibility is a hallmark of PPOs, which is why the statement about outside-network care resulting in reduced benefits and higher costs is true.

For context, PPOs don't operate on a prepaid basis like HMOs, and they’re generally private arrangements rather than public programs. Providers can form PPOs, and there isn’t a ban due to conflict of interest.