Insurers that have been offering PPO plans in the healthcare marketplace appear to be cutting back on the number of offerings or eliminating PPOs from the marketplace altogether, leaving consumers with fewer options. Is this becoming an industry-wide trend?
“In the large group market, traditional PPO offerings have been on the decline for the last several years as Consumer Driven Health Plans have gained popularity,” says John Greenbaum, senior vice president and employee benefits practice leader at national insurance brokerage Risk Strategies Company. “In the group market, the move has largely been driven by market concern over the now-delayed Cadillac tax.”
According to Greenbaum, insurers offering products on the public exchanges have curtailed their PPO offerings in favor of high-deductible plans. “Their motivation has been the difficulty of achieving profitability in a regulated market with no ability to underwrite the quality of risk,” he says.
Teri Mullaney, President and CEO of DST Health Solutions, says there are benefits to both payers and consumers to moving away from PPOs:
- For health plans: “The structure and design of HMO products provide the plan with more predictable risk, as it is delivered by a contracted provider network, and specialty referrals are generally managed by a PCP,” says Mullaney. She also says PPO plans make it difficult to transition to alternate value based-payment models since patients are not necessarily tied to a particular provider.
- For consumers: “Affordability continues to be a strong decision driver when selecting insurance coverage,” Mullaney says. “This is true for both Medicare Advantage and the marketplace plans. “In fact, for marketplace products, even ‘narrow network’ HMOs are becoming more widely accepted by consumers.”
Mullaney says despite these trends, PPOs continue to dominate the large group market, as there will always be those consumers who are “willing to pay a higher cost for more flexibility, such as the ability to utilize out-of-network providers and access to specialists without a referral.”
Implications for payers
Although it seems to be the general consensus that narrower network plans, such as HMOs, will help contain healthcare costs, Deborah Dorman-Rodriguez, partner and leader of the Healthcare Practice Group at Freeborn & Peters LLP in Chicago, cautions that may not always be the case. “There could be different implications for different payers depending on the particular company and the specific geographic market,” she says. “For instance, an insurer that is not known for its HMO product offerings may lose membership when it stops offering a PPO product because consumers choose a better known HMO product from a different insurer,” she says. “Other insurers could pull out of a particular market altogether, which we have seen already in some geographic areas.”
As others flounder, Michigan-based Blue Cross offers new PPO option
While other insurers are dropping PPO plans, Blue Cross Blue Shield of Michigan just launched a new Personal Choice PPO, a statewide organized system of care (OSC)-based health plan. OSCs are communities of doctors and hospitals within the Blue Cross PPO network that collaborate to provide coordinated patient care “Personal Choice PPO is the result of a decade of work on value-based care initiatives to help Blue Cross bring more affordable healthcare options and improved access to members, which helps contain healthcare costs,” says Dr. David Share, senior vice president of Value Partnerships at Blue Cross Blue Shield of Michigan. “The product creates a win-win-win, as members, employers and doctors benefit from this model.”
According to Share, although the individual market has experienced a significant shift toward HMO plans, the Michigan group market still has a strong demand for PPO products, which is why Blue Cross developed the Personal Choice plan on the PPO platform. “We are currently targeting this product to small and mid-sized employers and approximately 70% of these customers elect to enroll in a PPO product with the Blues,” he says. “Based on early feedback from our customers, there is a lot of excitement around Personal Choice and we expect to see many of our current customers move to this product over the next couple of years.”