Case of Vanishing PPOs

Consumers seeking health policies with the most freedom in choosing doctors and hospitals are finding far fewer of those plans offered on the insurance marketplaces next year. And the premiums are rising faster than for other types of coverage.

The plans, usually known as preferred provider organizations, or PPOs, pay for a portion of the costs of out-of-network hospitals and physicians. They are the most common type offered by employers, and some consumers in the individual marketplaces find them more appealing than health maintenance organizations and other policies that pay only for medical facilities and doctors with whom they have contracts.

In Philadelphia, the cheapest silver PPO will be $389 a month in 2016, $113 more than the cheapest HMO. This year, Philadelphians wanting a silver open-access plan had to pay just $66 more. As in many places, insurers also are selling different bronze, gold, and platinum PPOs (the metals indicate how the insurer and patient divide the cost of care), but the cheapest plan in each tier in Philadelphia is an HMO.

A Kaiser Health News analysis of costs in the three dozen states selling policies through the federal healthcare.gov website found a sharp difference in premium prices between plans that offer out-of-network care and those that do not. The analysis compared the monthly premiums for the least expensive silver-level plans - the category that are the most popular purchases - for a 40-year-old in each county.

While the average premium for the least expensive closed network silver plan - principally HMOs - rose from $274 to $299, a 9 percent increase, the average premium for the least expensive PPO or other silver-level open access plan grew from $291 to $339, an 17 percent jump, KHN found. The cost variations hold true for any age.

Katherine Hempstead, who studies insurance offerings for the Robert Wood Johnson Foundation, said there were fewer PPOs because insurers found them more expensive to offer. That's because out-of-network doctors generally charge more than the contracted rates insurers offer their in-network providers. And, even though insurers pay only a portion of an out-of-network bill, the costs add up.

"Out-of-network providers were causing carriers to lose a lot of money, and they really needed to put their thumbs down on that," Hempstead said.

New Jersey and New York offer no PPO plans on their exchanges. Hempstead found that there will be fewer or no silver-level PPOs in 22 states next year.

As in Philadelphia, the price gap between PPOs and HMOs is growing in many places where both are offered. In Chicago, the least expensive silver PPO next year will cost $270 a month, $75 more than the least expensive silver HMO, and 27 percent more than the cheapest silver plan costs now. Meanwhile, the price of the least expensive silver HMO in Chicago is dropping by 12 percent.

In Salt Lake City, the premium for the only silver PPO is growing by 30 percent, nearly four times the increase for the least expensive HMO. In Houston, the only plans available through the federal exchange have closed networks. Blue Cross Blue Shield of Texas, which offered a PPO plan in Houston for 2015, cited rising costs as a reason it will not offer any open-access plans next year. There is at least one PPO that consumers can purchase directly or through a broker, offered by the Memorial Hermann Health System, but it is not listed in the federal marketplace offerings, so premium subsidies are not available.

"Everyone is up in arms," said Jo Middleton, a Houston insurance broker. "I do not have a single client who is happy. They want PPOs and can't get them. They want the flexibility."

The biggest complaint, she said, is not that the HMOs don't allow out-of-network coverage, but that their networks are too small.

"If you are someone who needs several doctors and several specialists, it's difficult to find a network they are all in," Middleton said. "In many cases, the doctors may be in a network but only have admitting privileges at a nonnetwork hospital. In the 11 years I've been in the business, this is unprecedented."

None of the plans available through the federal exchange in Houston include the city's well-known MD Anderson Cancer Center in their networks. "It's a huge problem," said insurance broker J. Casey Lowery.

Plans with out-of-network benefits are not disappearing everywhere. Alaska, Arkansas, and Wyoming are bucking the trend by offering only PPOs. Out-of-network costs even with PPOs can be prohibitively expensive, since many PPOs will cover only a minority of costs, diminishing the difference from HMOs. Also, people who qualify for government premium subsidies can be insulated from the full cost of a PPO.