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RWJF's Kathy Hempstead: Shift from PPO plans 'raises the stakes' for health insurers


As someone currently immersed in planning a wedding--and constantly teetering on "decision fatigue"--I'm suspicious of the conventional wisdom that more choices are always better.

As the Affordable Care Act's third open enrollment period begins, health insurers, too, are questioning the concept of giving people unlimited options. Recent research shows companies are offering fewer preferred provider organization (PPO) plans on the exchanges.

Whether you see the trend as positive or negative, it's here to stay, Kathy Hempstead, who directs coverage issues at the Robert Wood Johnson Foundation, told me in a recent interview. Insurers are increasingly learning that the out-of-network component of PPO plans is problematic, she says, adding those that made public announcements about dropping PPO plans have been frank about the fact that they're losing "a lot of money."

An analysis from Hempstead's organization found that two-thirds of insurance companies that offered PPO plans last year on the ACA exchanges have either reduced or stopped offering them. Another report, from Avalere, turned up a similar result: It found a 31 percent decline in PPO plans on the exchanges from 2014 to 2016.

And even before insurers unveiled their 2016 offerings, almost half of insurance networks on the ACA exchanges restricted out-of-network care except in cases of true emergencies or an approved formal petition, an October study found. 

Hempstead says insurers are using network design to control costs because they have a limited ability to raise premiums, as consumers are highly cost-conscious, so instead they must try to lower utilization and limit pricey out-of-network care.

Because of this trend in plan offerings, she says, "consumers are going to seek less out-of-network care than they did before."

In fact, past consumer research from RWJF has indicated that consumers value affordability more than access to specific providers when it comes to choosing health plans, Hempstead notes. Or as one hospital CEO put it, there's "no question" that consumers are willing to trade choice and access for price.

But that market strategy should come with a caveat, Hempstead argues.

"That raises the stakes for the carriers," she says, noting that if payers are going to restrict more out-of-network care, they have to get serious about knowing who is in their networks and communicating this information to consumers. (In fact, two major California insurers are facing fines and lawsuits for allegedly failing to offer accurate provider directories.)

Insurers hand-picking networks is happening outside of the exchanges, as well, Hempstead says, pointing to the controversial new tiered network from Horizon Blue Cross Blue Shield of New Jersey as well as the national Blue Cross Blue Shield Association's new value-based network for national employers called Blue Distinction Total Care.

"It seems like this is an attempt to really standardize the care and approach to care," she says. But when insurers essentially tell customers 'We're really going to curate this experience for you,' then I think they have to own that."

To Hempstead, that means not only offering accurate provider networks, but also mimicking other industries and providing a comprehensive customer service experience--something she says health insurers haven't yet mastered. "Nobody is giving consumers an intuitive sell of a customer experience," she says.

I can't help but think she's onto something here: Evidence is mounting that ACA exchange consumers in particular still need more guidance to pick the right health plans. So, in much the same way a wedding venue will offer up vetted, "preferred" caterers--limiting your choices but doing a lot of the legwork for you--health insurers that offer limited provider plans must strive to sweeten the deal for consumers.

After all, whether in health insurance or event planning, it pays to have happy customers. - Leslie @HealthPayer