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Life Health > Health Insurance

Advisors Struggle To Compare PPOs

By Allison Bell

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The rise of the “consumer-driven health plan” is reminding group health advisors of the difficulty of comparing some preferred provider organizations with other PPOs and PPO network providers with other network providers.

The market has delivered a clear-cut vote: Employers in most parts of the country love PPOs.

Many plans that still call themselves health maintenance organizations act very much like PPO plans. Even the organizers of CDHPs have discovered that workers with health savings accounts or health reimbursement arrangements still like pre-negotiated PPO network discounts.

“The predominant health plan that wraps around the HSAs has been the PPO,” says Edward Pudlowski, a health and welfare expert at Ernst & Young L.L.P.

However, group health advisors find that comparing PPO costs is tricky for employers that self-insure their health plans.

Comparing quality with survey data or other statistics, as opposed to quick efforts to grill friends and neighbors about their PPOs, can be even trickier, Pudlowski says.

The National Committee for Quality Assurance, Washington, the group that publishes detailed health maintenance organization performance statistics, has been accrediting PPOs for several years, but it is just starting to persuade PPOs to publish their own health plan “report card” data.

“Better information on physician and hospital quality and performance data from PPOs and other health plans must become more widely available if consumers are expected to make informed choices and seek out quality care in the new medical marketplace,” the NCQA argues in its 2004 health care quality report.

So, what does all this mean for group health advisors?

Agents, brokers and consultants will have new opportunities to add value by helping employers come up with ways to shop for PPOs based on something other than price and gut instinct, experts interviewed predict.

For now, even the term “PPO” is a little hard to pin down. The term can refer to an insured, retail health plan that gives members access to a network of doctors, hospitals and other providers that have agreed to meet the plans standards for credentials and quality and accept the plans payment schedule. Many of those retail PPO plans are run by companies such as Anthem Inc., Indianapolis, and UnitedHealth Group Inc., Minnetonka, Minn., that also run well-publicized HMOs.

The term PPO also can refer to the provider networks that wholesale PPO companies develop and rent to insurers, HMOs, self-insured employer health plans, workers compensation programs, health discount card companies and others.

Even though some of the wholesale PPOs have a huge reachAtlantic Information Services Inc., Washington, says the biggest, Multiplan Inc., supplies provider networks used by 25 million Americansmost wholesale PPOs have built little consumer brand awareness. For most consumers, the only signs that the big wholesale networks exist are mysterious logos at the bottom of health plan membership cards.

Retail PPOs and self-insured plans set up as PPOs covered 55% of all members of U.S. employer-sponsored health plans in 2004, up from 11% in 1988, according to data from the Henry J. Kaiser Family Foundation, Menlo Park, Calif.

HMO penetration rose to 25% from 16% over that same period, but HMO penetration in the group health market peaked at 29% in 2000.

Over the years, the PPO has become so popular that many HMOs, other than the large HMOs run by Kaiser Permanente, Oakland, Calif., have tried to compete with PPOs by eliminating referral requirements for access to specialists, shifting to PPO-style payment arrangements and renting wholesale PPO networks to serve multistate employers.

PPOs also have beat out HMOs in the area of price. Back in the 1990s, “the HMO was almost always less expensive than the PPO, and it was definitely easier to deal with for the patient,” says George Issaeff, chief executive of Gemini Group Inc., Denver, a benefits broker. “Today, with most carriers, the PPO is less expensive.”

Meanwhile, many CDHP organizers who once bragged about their ability to free plan members from provider networks now give members the option of using PPO networks.

The idea of patients dickering over rates with their own doctors and hospitals has been “too much for the average employee to understand,” Pudlowski says.

Although “its possible for an individual to negotiate with a provider, the reality of that is that its very, very rare,” says James Herrington, chief marketing officer at Private Healthcare Systems Inc., Waltham, Mass.

Most employers who set up consumer-driven health plans are simply adding health accounts and high deductibles to the kinds of PPO plans that theyve been using all along, Herrington says.

When group health advisors are helping employers shop for fully insured PPO plans, comparing rates is straightforward. The advisors ask for rate quotes. Advisors assume the quotes reflect PPOs beliefs about the depth of their network discounts.

However, when advisors are helping self-insured employers shop for group health coverage, price comparisons are much more complicated because employers are, in effect, buying into a discount program that may offer some utilization review features. The employers themselves have to assume the risk for claims costs, and they are the ones who have the biggest stake in knowing how deep PPO network discounts really will be, Pudlowski says.

One way to estimate discount levels is to ask PPOs for rates for fully insured coverage.

Another approach, Pudlowski says, is to submit a list of common diagnostic and procedure codes to PPOs and ask them how much their network doctors would charge for each diagnosis or service.

But Herrington says there are many ways for PPOs to throw off comparisons. One way is for PPOs with several provider agreements in effect in a given market to use the rates included in the most heavily discounted contract, even if that contract applies to only a small percentage of a PPOs providers in the market, Herrington says.

The best strategy is for a group health advisor to get a large sample of a client employers actual claims experience and see how a PPO reprices those claims, to determine how well the PPO will serve that employer’s own employees, he says.

Unfortunately, he says, some health carriers now refuse to give group health advisors large batches of detailed claims data, and some PPOs refuse to reprice sample batches of claims data.

Comparing PPO quality through statistics, rather than personal experience and word of mouth, is even more challenging.

HMOs began setting up quality statistics programs early, in part because they played an active role in managing patients care and could ask patients primary care providers for relatively complete patient information.

But many PPOs play little or no role in managing patients care, and, for the most part, most of the patient data they collect is claims data.

Because HMOs got a head start on measuring quality, hundreds of them now publish performance scores in the HEDIS format, an NCQA quality reporting format. Although the NCQA has been using qualitative data to accredit PPOs for several years, only a few report HEDIS performance data.

“But now theres a shift there,” says NCQA spokesman Brian Schilling.

CIGNA Corp., Philadelphia, has given PPO performance reporting efforts a boost by announcing plans to release HEDIS data for some of its PPOs starting in 2006, Schilling says.

Pudlowski says he handles quality questions both by “asking around” and requesting the same kinds of HEDIS format quality statistics that HMOs supply.

Although PPOs have been slow to publish HEDIS-style data, many retail PPOs can supply some of the same kinds of performance and patient satisfaction statistics that their sister HMOs publish, Pudlowski says.

Group health advisors could play an important role in another area: Persuading the PPOs that serve CDHP members to give patients the information they need to know the exact price each doctor in town charges for an office visit or an appendectomy.

“The plans want to be able to market based on [provider] price,” Herrington says.

But many provider contracts, including those issued by Private Healthcare, forbid either the doctors or Private Healthcare from sharing price data with other parties, Herrington says.

PPOs themselves are responding to the new demands for information by working with organizations such as NCQA and URAC, a health care quality group with roots in the PPO industry, to find ways to supply more data.

The PPOs main trade group, the American Association of Preferred Provider Organizations, Jeffersonville, Ind., has scheduled sessions on topics such as “data needs,” “technology tools for the consumer” and “determining value for benefit dollars” for an upcoming conference in Chicago.

Reproduced from National Underwriter Edition, March 17, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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