Preferred Provider Organizations (PPO) are networks of doctors, hospitals, and other healthcare providers. The health plans associated with PPOs save you money when you use a provider within the network, but they will also provide you with coverage when you get services from outside the network. PPO plans are a combination of managed care and traditional indemnity plans.
In a PPO plan you don’t choose a Primary Care Provider: this is the major difference between PPO and POS plans. Since you don’t have a Primary Care Physician, you don't need a referral for specialist care. There is a higher copayment if you need healthcare from outside of your PPOs network.

The insured members pay a co-payment at the time of each medical service. Each person will also have a yearly deductible to pay out of his/her pocket, before the insurance company will start paying medical fees. The insurance usually pays a percentage of the medical fees (often 80%) for the in-network doctor, with the patient responsible for the remainder of the bill. If the person wants to see an out-of-network doctor, he/she may do so without permission; but the deductible for out-of-network services may be higher and the percentage the insurance will pay may be lower. In other words, the patient will be responsible for a greater part of the fee. This encourages the people insured with a PPO to use the physicians, other medical providers and hospitals in their network.

Advantages of a PPO include the flexibility of seeking care with an out-of-network provider if so desired, even though it is more out-of-pocket expense for the patient. PPO networks also have prescription services which provide prescription drugs at a reduced cost. The overall premium for a PPO is less than for individual health coverage and will often include more covered medical services. There is a large network of medical providers representing large geographic areas.