qotd: PPOs further erode benefits by cutting back on out-of-network coverage

Robert Wood Johnson Foundation
December 3, 2015
This year's model: PPOs in 2016 offer less out-of-network coverage
By Katherine Hempstead, PhD

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.

http://www.rwjf.org/content/dam/files/rwjf-web-files/Research/2015/PPO_This%20Years%20Model.pdf

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Comment by Don McCanne

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.