California Life and Health Insurance Practice Exam

Coverage for care received from a network provider pays more than care received from a non-network provider in what type of health plan?

1. Health Maintenance Organization (HMO)

2. Exclusive Provider Organization (EPO)

3. Preferred Provider Organization (PPO)

4. Indemnity plan

The correct answer is: Preferred Provider Organization (PPO)

In a Preferred Provider Organization (PPO) plan, insured individuals typically receive a higher level of benefits and lower out-of-pocket costs when they seek care from network providers compared to non-network providers. The structure of PPOs is designed to encourage members to utilize designated healthcare providers, who have agreed to provide services at reduced rates. This network-centric approach fosters cost efficiencies and better care management. When members choose to see a non-network provider, they still have coverage, but they may face higher deductibles, co-payments, or coinsurance. This tiered benefit system highlights a key characteristic of PPOs: they provide flexibility in choosing healthcare providers while incentivizing the use of in-network services through lower costs. HMO plans require members to select a primary care physician and typically do not cover services received from providers outside of the network, except in emergencies. EPOs also do not cover out-of-network care, while indemnity plans allow more freedom of choice regarding healthcare providers but generally do not offer the same level of incentive to use network providers like PPOs do. Therefore, PPOs are clearly identified as the plan where coverage for care received from network providers is emphasized and financially rewarded.