A Preferred Provider Organization is a form of managed health care in which the insured individual is free to choose their own physician. They will, however, receive better benefits including lower deductibles, lesser co-payments, and higher reimbursements if they use the services of a network of pre-approved health care providers.

The pre-approved providers hold contracts with the insurance company and have agreed to accept reimbursement at previously negotiated rates. Preferred Provider Organizations are an attempt to provide the same kind of lower cost health care intended by Health Management Organizations or HMOs but at the same time to return a degree of control and choice to the individual.

Both PPOs and HMOs are aspects of the concept of managed health care that became popularized during the administrations of Ronald Reagan as an effort to control spiraling medical costs in the United States and to relieve some of the burden of payments from the federal Medicare program.

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