A PPO health insurance plan is basically an insurance plan that is supported by a preferred provider organization. This preferred provider organization ("PPO") is a network of providers that have each agreed to provide healthcare services to members of the PPO at lower rates than they would otherwise charge. The providers do this in exchange for a larger referral base from the entities that they contract. These entities are insurance companies.
The hard work of negotiating and contracting with medical providers is done by the networks who then charge a fee to the insurance companies for utilizing their network. In this manner, the insurance companies can lower their costs for medical claims by having to pay reduced rates to the medical providers. In addition, policy-holders also benefit by having access to these same rates and reduced prices for any and all out-of pocket healthcare costs that they utilize. Whether for deductibles, services not covered, etc. the consumer also benefits from these reduced fees.
In addition, PPO health insurance plans also allow for utilization outside the network of the contracted medical providers. They allow the access, but they attempt to persuade policy-holders from going outside the network by lowering the benefits for any such utilization. In this manner, consumers are enticed to utilize as much of their healthcare services from network providers, which lowers the costs to the insurance company, lowers the out-of-pocket to the insured, and in theory lowers the health insurance premiums of consumers.
PPO health insurance plans are fairly flexible and allow plenty of choices for consumers. There are many health insurance companies today that provide these types of plans and are also done in conjunction with high-deductible and/or savings accounts.
There are also many, many medical networks in existence today and they must be maintained, expanded, and constantly kept with low contracted prices. There are also networks that lease access from one another in order to provide more expansive coverage. There are good networks and there are also bad ones. There are even health insurance companies that invest and build their own medical networks.