Arkansas Life and Health Insurance Practice Exam

PPO plans pay providers based on a:

1. Capitation fee

2. Discounted fee for service negotiated in advance

3. Reimbursement fee

4. Prospective payment

The correct answer is: Capitation fee

PPO plans pay providers based on a capitation fee. In a capitation fee arrangement, the healthcare provider is paid a fixed amount per patient regardless of the actual services provided. This incentivizes the provider to focus on preventive care and managing health outcomes efficiently. The other options are not typically how PPO plans operate: - A discounted fee for service negotiated in advance is more common in fee-for-service plans. - Reimbursement fee refers to the amount the insurance company will pay for a specific medical service after it has been provided, which is not the primary method of payment in PPO plans. - Prospective payment is a fixed prearranged payment for a specific service or treatment, which is not the primary method used in PPO plans.