Two studies released in early November reported that fewer health insurers are offering preferred provider organization (PPO) plans for individuals on health care exchanges in 2016. Health insurance analysts and professionals interviewed by the Business Journal pointed to consumer trends as a cause for the shift, as they are increasingly opting for more economical health maintenance organization (HMO) plans, which offer narrower physician networks and require referrals to see specialists.
PPO plans, which are typically higher in cost, offer broader networks, do not require referrals to see specialists, and cover visits to health care providers outside of an individual’s network.
According to the Robert Wood Johnson Foundation, a national philanthropy dedicated to health matters, 28 percent of providers dropped all their silver PPO plans from exchanges for 2016, 39 percent of providers reduced these offerings, and 33 percent retained their silver PPO plan selections. Silver plans are considered the standard level plans on health care exchanges.
A study by Avalere Health, a strategic advisory company focused on resolving health care issues, reported a 31 percent decline in PPO plan offerings on health care exchanges from 2014 to 2016.
The Robert Wood Johnson Foundation found that eight states are losing all individual silver PPO plan offerings on health care exchanges for the upcoming year, including: Florida, which had PPOs from three carriers last year; New Mexico, which had two PPO providers; Texas, which had five; and Iowa, Indiana, Nevada, South Carolina and Utah, which each had one silver PPO plan provider through exchanges last year.
In California, one provider dropped its individual PPO plan from its health exchange, Covered California, last year. Now, only two carriers, Anthem Blue Cross of California and Blue Shield of California, offer individual PPO plans on Covered California.
Individual PPO plan offerings are being dropped outside of health care exchanges, too. Blue Cross and Blue Shield (BCBS) of Texas announced in July that it was dropping PPO plans in the individual retail market. A statement on the insurer’s website said it was the only provider of individual PPO insurance plans for individuals in both 2014 and 2015.
As BCBS Texas adapted to the market following the passage of the Affordable Care Act, it “found that the individual PPO plan was no longer sustainable at the cost it was being offered,” according to its website. The statement continued, “Because we want to make sure that our plans are affordable, we decided not to offer individual PPO plans in 2016.”
Ben Gonzalez, a spokesperson for the Texas Department of Insurance, commented on the state’s loss of PPO plans in an e-mail to the Business Journal. “We are seeing carriers in the market shift from offering PPO plans with out-of-network benefits, to EPOs (exclusive provider organizations) and HMOs with no out-of-network benefits, especially on the ACA [Affordable Care Act] exchange,” he wrote.
Chris Sloan, a manager with Avalere Health who conducted the analysis in the firm’s recent report, said via e-mail that health insurers are responding to consumer demand. “Consumers heavily enroll in the cheapest plans in the market (specifically the lowest priced silver plans) and that trend doesn’t show any sign of slowing,” he observed. “So, to respond to that, plans are looking for new ways to reduce their premiums, and one of those ways is to switch to a narrower network [such as in an HMO or EPO].”
Sloan pointed out that 2016 is the first year that health insurers have been able to design their offerings based upon claims experience on health care exchanges. When they planned their offerings for 2015, which Sloan said was back in May 2014, insurers only had about four months of exchange enrollment to go on.
For 2016, “That means they had a chance to review spending/medical costs and make adjustments to their benefit designs/networks,” Sloan wrote. “Given that information, they have likely evaluated their benefit designs and determined that, for some carriers, shifting away from PPOs to HMOs is a cost-effective strategy to drive enrollment and/or increase the viability of their offerings.”
Requests for comment from BCBS Texas and BCBS New Mexico, which also dropped PPO plan offerings in 2016, were not answered. Humana, which dropped all PPO offerings on Healthcare.gov, declined to comment.
“It is a very competitive market, and the carriers are looking for ways to keep their costs down,” Dr. Katherine Hempstead, who authored the Robert Wood Johnson Foundation report, said. Hempstead is the foundation’s director and senior program officer, and leads its work on health insurance coverage. “Eliminating access to out-of-network providers is definitely one way to do it,” she added.
“To a certain extent, this is happening in the individual market off the exchange, and I won’t be surprised if we see more of this happening in employer-sponsored insurance,” Hempstead said.
Craig Gussin, vice president of public affairs for the California Association of Health Underwriters and partner of San Diego-based Auerbach & Gussin Insurance and Financial Services, noted that the number of PPO plans for individuals is being reduced outside of the health care exchange as well.
“If you come to me and you want group insurance, it’s like, fine. Every company has HMOs and PPOs,” Gussin said. “But when we get into the individual arena, that list gets really small . . . there aren’t as many choices.”
Prior to the implementation of the ACA, Gussin, as an insurance agent, had more options for his clients. “Everybody except for Kaiser offered PPOs. We had a lot more choices,” he said. “Now we can only have gold, platinum, silver or bronze [health plans]. Well, before the ACA, we had a $0 deductible plan, we had a $500 deductible, a $750, a $2,000, a $5,000,” and so on, he said.
“I used to be able to show you 40 or 50 [individual health] plans,” Gussin continued. “Now, it’s probably down to 15 or 20 [plans] and, of those, you’re probably looking at eight to 15 PPOs.” The reduction in choices is due to requirements laid out in the ACA, which restrict how health insurers can structure their plans, he explained.
“The interesting thing to look at is to what extent does this become typical in all insurance products, or to what extent is it just sort of a thing about the ACA marketplaces,” Hempstead said. “We have seen from a lot of surveys of consumers that they are willing to trade off access to providers for a lower cost product, and I think, given that, it makes a lot of sense that that’s what carriers would do.”
Hempstead said she expects PPO plan offerings to be reduced in the short term, but she isn’t sure what will occur in the long term. “People say the ACA plans are kind of like the bellwether or the canary in the coal mine of what is going to happen in the rest of the insurance market,” she said. “So I wouldn’t be surprised if we do see more narrow networks, or certainly like a higher cost for out-of-network care being available.”