What term is used when healthcare insurers negotiate contracts with providers to offer services at a favorable cost?

The term used when healthcare insurers negotiate contracts with providers to offer services at a favorable cost is a Preferred Provider Organization (PPO). PPOs are designed to provide members with a network of healthcare providers who agree to deliver services at reduced rates. This system benefits both the insurer and the insured by maintaining lower overall costs for medical services while offering a larger selection of providers compared to some other types of managed care plans.

In a PPO, members have the flexibility to choose their healthcare specialists without needing a referral, which is a key feature that distinguishes them from structures like Health Maintenance Organizations (HMOs). HMOs require members to select a primary care physician and obtain referrals for specialty care, which can sometimes limit access but often at the expense of paying lower premiums.

The concept of negotiating favorable costs is central to the functionality of a PPO, enabling members to receive more affordable care while still having the ability to seek services from out-of-network providers at a higher cost, should they choose to do so. This negotiation process helps keep premiums manageable while encouraging high-quality care from those providers that are part of the network.

Ultimately, the focus on negotiated rates and network flexibility makes Preferred Provider Organizations a prevalent option within the landscape of healthcare insurance.