Is the PPO an endangered species?

The trend for 2016 is towards more HMOs and fewer PPOs

The trend in 2016 is towards HMOs and away from PPOs
PPOs aren't as common as they once were. Keeping your healthcare team means reading the fine print - and it might cost more. Ariel Skelley/Blend Images/Getty Images

Depending on where you live, you might have noticed that PPO (preferred provider organization) health plans aren't as widely available as they used to be. It's not your imagination... a recent study by the Robert Wood Johnson Foundation found that only 33% of the PPO plans that were offered in 2015 are available unchanged for 2016, while 28% were dropped entirely, either because the carrier exited the market altogether, or stopped offering PPO plans.

The other 39% are still available, but in fewer rating areas, or with fewer overall plan options, or with a more restricted network.

What is a PPO?

PPO plans have a network of providers with whom the health insurance carrier has negotiated payment rates. Referrals from primary care physicians aren't required in most cases (although prior authorization may be required for some care), and patients can visit any provider within the network.

Patients can also see out-of-network providers, although they'll generally incur higher costs for doing so. And sometimes patients inadvertently receive care from an out-of-network provider who works at an in-network facility - and find themselves stuck with a bill much larger than they expected.

PPOs have historically been popular with consumers because of the flexibility they offer.

The trend towards fewer PPOs

In Texas, Cigna, Humana, and Blue Cross Blue Shield of Texas have stopped offering PPO plans for individuals, switching instead to HMOs.

There are still some PPOs available in the Texas exchange, but in some areas of the state - including Houston - there are no PPO options on the exchange.

Blue Cross Blue Shield of New Mexico, which insured about a third of the exchange enrollees in the state in 2015, opted to pull out of the exchange entirely for 2016, and is only offering one plan - an HMO - outside the exchange.

The carrier's decision came after their proposed rate increase of nearly 52% was rejected by the New Mexico Office of the Superintendent of Insurance.

Blue Cross Blue Shield of Illinois insured about 80% of the people who got coverage through the Illinois exchange in 2015. Prior to the start of the 2016 open enrollment period, BCBS of Illinois announced that they would no longer offer their broad network PPO (Blue PPO), and would instead transition insureds to their narrower Blue Choice PPO.

These are just some examples, but it's a trend that's mirrored in many states across the country as carriers work to control costs. When carriers limit the number of doctors and facilities in their networks, they can negotiate lower reimbursement rates for those providers in trade for the fact that they'll be sending a greater volume of patients to those providers, since there are fewer providers in the network. And when health plans use an HMO model that requires referrals for specialist visits, they can eliminate specialist visits that could have been treated by a less-costly primary care provider.

PPOs increasingly limit out-of-network coverage

PPO plans have always encouraged insureds to use in-network doctors and hospitals by covering a larger portion of the charges when patients use in-network providers. But unlike HMOs (which don't cover out-of-network care at all unless it's an emergency situation), PPOs have typically provided solid coverage even outside the network - but with increased out-of-pocket costs for the patient.

It was common to see PPO plans where patients would have double the out-of-pocket exposure if they went to out-of-network providers. So if the plan had a $5,000 cap on out-of-pocket costs for in-network providers, it might have had a $10,000 cap on out-of-pocket costs if the patient opted instead to use out-of-network providers. This was usually enough to steer most patients towards in-network providers, but some patients - particularly those with serious chronic illnesses - like the flexibility of being able to see any doctor they want, albeit with higher potential costs.

But PPO plans are increasingly cutting back on out-of-network coverage by eliminating the cap on out-of-pocket charges when patients see providers who aren't in the plan's network. In 2015, among silver-level PPO plans, 14% had no limit on how high a patient's out-of-pocket costs could be if they went outside the network. For 2016, that's grown to 30% of silver-level PPOs. On these plans, patients can still see out-of-network providers, but they should be aware that the sky's the limit when it comes to how much they'll have to pay to be able to do so. 

In New Jersey, Horizon Blue Cross Blue Shield rolled out a new health plan for 2016 that uses a tiered network but does not provide any out-of-network coverage at all (except for emergency care). Referrals from primary care physicians are not required, and patients can use any providers in the network - but costs are lower if they use Tier 1 providers.

What does this mean for consumers?

Health insurance carriers are increasingly turning to narrower networks in an effort to contain costs and keep premiums as low as possible. And consumers tend to prefer lower premiums, even if the trade-off is a narrower network. Since health insurance carriers must now accept all enrollees (during open enrollment or a special enrollment period) regardless of medical history, and since all new plans must be compliant with the ACA's mandates, carriers are relatively limited in terms of how they can reduce costs.

Narrower networks - within the guidelines created by HHS and the state-run exchanges - are one of the ways that health plans can offer lower premiums than their competitors. For some enrollees, this is an acceptable trade-off. But for those who prefer the flexibility of a broader network and/or the option to go outside the network while still having the peace of mind offered by a cap on out-of-pocket costs, it's more important than ever to read the fine print before selecting a plan.

If PPO options are available in your area, pay attention to whether there's a cap on out-of-pocket costs if you go outside the network. And if there are multiple plans available to you, take time to compare their provider networks, as some have much broader networks than others, and receiving care within the network will always be the least-costly option.

Sources:

Department of Health and Human Services, FINAL 2016 Letter to Issuers in the Federally-Facilitated Marketplaces, February 20, 2015. Accessed 12/31/2015.

Hempstead, K., Burnt Offerings? PPOs Decline in Marketplace Plans. Robert Wood Johnson Foundation, November 3, 2015. Accessed 12/31/2015.

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