The cost of health insurance continues to outpace general inflation, even in this environment of high general inflation.
One way insurers are offering to combat the rise in health costs is to limit doctor choice. By steering members to participating providers, the health insurer seeks to reduce allowable charges.
This is not a new concept. We’ve seen various methods offered by carriers to steer members to specified providers as a tactic to control costs.
- Indemnity Plans—The original health insurance plans were indemnity plans. There was no restriction on where you could go to seek care but, generally, you shared in the cost on a percentage basis (the insurer pays 80%, and you pay 20%) after a deductible. The insurance carrier had little leverage to limit billable charges.
- Health Maintenance Organization (HMO)—HMO plans began to grow rapidly in the 1970s. These plans may have been insurers’ first attempts to control health costs by limiting provider selection. Members chose an accepted “gatekeeper” doctor and needed a referral from their gatekeeper doctor for all non-emergency services.
- Preferred Provider Organization (PPO)—PPO plans are the most popular type of health plan today. The insurance carrier directly or indirectly contracts with a network of doctors across all disciplines (general practice and specialty). Members may choose any contracted PPO provider to receive the highest level of benefits in their insurance plan. If they go out-of-network the employee receives fewer benefits. There are two levels to this type of plan: in-network and out-of-network.
Issue: PPO’s originally had a positive impact on reducing health costs. However, pressure from members to include more doctors in the networks has resulted in the majority of providers participating in any given PPO network. Instead of contracting with the providers on a capitated basis, the insurance carriers contracted to pay the providers at a discount of billable charges but did not impose any limit on the amount they could bill.
- Choice or Enhanced PPO—some insurance carriers have added a third tier of providers in a PPO format. The highest level of benefits is paid when a member seeks care through the carrier’s enhanced list of in-network providers. General in-network doctors are a second tier at lesser benefit, and out-of-network doctors are the third tier.
- Exclusive Provider Organization (EPO)—Locally, we are seeing a rise in plans that utilize an Exclusive Provider Organization network. An EPO is characterized by an in-network choice of doctors with no out-of-network coverage except for emergencies. These plans are becoming more popular, especially in the individual marketplace. As costs continue to rise, we may see more group plan sponsors seek these types of plans.
Limiting doctor choice is a legitimate way of reducing health costs but is not popular with employees. Understandably so. Employees and their families forge bonds with their healthcare providers, and it is difficult to communicate the need to change providers to get the highest level of benefit under their health plan.
We welcome the opportunity to discuss with you the various types of plan options available in the marketplace and to maximize the value of your health insurance plan.