Uncertain prognosis: California workers face a whirlwind of change as employers seek alternatives to costly HMOs
By Clea Benson
The Sacramento Bee
November 9, 2005
Because HMOs are more tightly regulated than other types of health insurance, most of the plans that shift costs to consumers are preferred-provider organizations, or PPOs. They give patients more flexibility in choosing their doctors than HMOs, but also give insurers more flexibility to change what they cover and how they charge for it.
Unlike PPOs, HMOs must cover certain benefits, such as maternity care. The state Legislature has passed 23 bills in the past seven years mandating that HMOs cover specific health costs.
(In California) eight out of 10 employers who provide health insurance are offering PPO coverage, up from just under half of employers in 1996. Meanwhile, only four out of 10 companies are offering HMO plans this year, down from six out of 10 in 1996, according to the Kaiser Family Foundation.
And the gap in premiums between HMOs – traditionally the cheaper option – and PPOs is dwindling, because HMOs can’t easily pass rising costs on to consumers. In some workplaces, HMOs now cost more than PPOs.
http://www.sacbee.com/content/politics/story/13834795p-14675316c.html
Comment: California HMOs became popular because they provided comprehensive benefits at a lower premium. Although PPOs were more expensive and had greater cost sharing, they were frequently selected by financially secure individuals since they allowed more choice because of their larger panels of providers.
Since PPOs are not as tightly regulated as HMOs, they were allowed more flexibility in product design. To improve market share, they needed to slow the increase in premiums. They could do this by limiting benefits and by dramatically increasing deductibles, co-payments and coinsurance. The result was predictable. HMO coverage is being displaced by PPO coverage.
What is the impact on the patient-consumer? As Anthony Wright, executive director of Health Access states, “This new trend is all about placing more risk and more cost onto the individual.” By making PPOs affordable, health care has become unaffordable.