This year’s model: PPOs in 2016 offer less out-of-network coverage
By Katherine Hempstead, PhD
Robert Wood Johnson Foundation, December 3, 2015
Preferred Provider Organization plans (PPOs) are health insurance products that offer both a relatively “broad” provider network, along with some coverage for use of out-of-network providers. Since last year there has been a significant reduction in the number of PPOs offered in the Affordable Care Act (ACA) marketplaces. A prior analysis showed that of the 131 carriers offering silver PPO products in 2015, only about one-third remained unchanged in 2016, while the rest were either reduced in scope or eliminated.
Since changes in the generosity of out-of-network coverage don’t affect a plan’s actuarial value (AV), carriers can adjust these features without affecting the AV status. Plans new to the market in 2016 provide less coverage for out-of-network providers as compared to those that are continued from last year.
Fewer plans have a cap on out-of-pocket spending for out-of-network services
The out-of-network coverage offered in a PPO usually consists of some kind of cost-sharing—most often co- insurance—for visits to out-of-network providers. This benefit is usually subject to a separate out-of-network deductible, in addition to which there may be an annual out-of-network Maximum Out-Of-Pocket cost (MOOP). While an out-of-pocket maximum is required by the Affordable Care Act (ACA) for in-network coverage, there is no similar requirement with regard to out-of-network coverage.
There has been a sharp decline in the prevalence of out- of-network MOOPs in PPOS in 2016. While only 14 percent of PPO plans offered in 2015 did not have an out-of-network MOOP, this is the case for 45 percent of plans newly offered in 2016. For the market as a whole, the percent of PPOs with no MOOP doubled from 14 percent in 2015 to 30 percent in 2016.
Average MOOPs for out-of-network services have increased
For plans that have MOOPS, the annual cap has increased as well. Figure 2 shows the mean MOOP has increased to $16,700 in 2016 from $14,500 in 2015. Among plans new to the market in 2016, the average out-of-network MOOP was $17,900. For 25 percent of plans on the market in 2016, the MOOP was greater than $19,000. For plans that stayed in the market from 2015 to 2016, the average increase in the MOOP was approximately $1,000, although six plans increased their MOOP by more than $10,000.
Both the reduction in the number of PPOs and this “skinnying” of coverage within existing, and particularly new PPOs should be viewed as part of a broader carrier trend designed to reduce exposure to higher cost out-of-network providers. These changes are ostensibly being made to preserve affordability for marketplace products, which consumers have repeatedly indicated they value most. However, it remains to be seen to what extent consumers will continue to be willing to trade access to providers for lower premiums.
By Don McCanne, M.D.
After a few decades of experiencing insurance company innovations designed to keep their premiums affordable, we should not be surprised by their ingenuity in figuring out new ways to avoid paying for health care. Now that networks are narrower and yet more prevalent, such that more patients are inadvertently receiving care out-of-network, the PPO plans are introducing further innovations to avoid paying for much of the out-of-network care that is often unavoidable for many patients.
Plans are increasing the maximum out-of-pocket costs (MOOP) that patients must pay for care obtained out-of-network. But an even more alarming trend is that almost half of the newer PPO plans are totally eliminating MOOP, which could expose patients to truly catastrophic expenses. To add to the insult, these expenses do not apply to in-network deductibles and MOOP.
We can anticipate that we will see continual erosion in health plan benefits as the private insurers contrive to find ever new ways of welshing on paying for our legitimate medical bills. This behavior is inherent in their DNA. They are structured to optimize their self-serving business model rather than to optimize patient service. That’s the nature of markets.
When markets fail us, we can turn to our own public entity, established to serve all of us, and that is our government. We don’t need a government-owned health care delivery system since the private, non-profit sector functions reasonably well for us, but we do need a publicly-owned and publicly-administered health care financing system – a single payer national health program dedicated to patient service.