That follows the withdrawal this year from the individual insurance exchange of Blue Cross and Blue Shield of New Mexico when state regulators would not approve a 51 percent rate hike. Between the NMHC and Blue Cross actions, the estimated 23,900 people who today buy PPOs on the individual insurance exchange will have to switch to a health maintenance organization plan, or HMO.
A PPO allows a customer to choose to receive care from any number of medical professionals with whom the insurance company has contracts. You can get service from people out of the provider network. However, you’ll have to pay more out of pocket to do so. Depending on the plan, you can usually just decide what services you want to receive and get them without asking the PPO’s permission.
An HMO also has a network of providers, but you usually have to get your primary care provider to decide what you need and refer you to someone in the network. In exchange for this lack of freedom and flexibility, the cost to the customer in premiums, copayments and deductibles is usually lower than the PPO members incur.
Three things work against the insurance company that offers a PPO, assuming that company wants to make some money.
First, PPO customers are able to seek more care than HMO customers do. With relatively few restrictions on their medical decision-making, customers can and do head to an expensive specialist for services that could be handled by a lower-cost primary care doc during a routine office visit.
Second, PPOs tend to attract sicker customers, according to the insurance experts I talk to. Insurers call that adverse selection. Someone with big health problems, or someone who has been without insurance until the advent of Obamacare and has delayed seeking care for a variety of issues is often attracted to the PPO because access to specialty care – which is to say more expensive care – is relatively unfettered. Blue Cross and Blue Shield said it needed the 51 percent rate hike it requested because of adverse selection.
Third, insurance brokers say there are a number of wealthy people who live part time in Santa Fe and part time in places like New York and Los Angeles. These people buy a PPO plan in New Mexico, then use it to buy out-of-network services when they go to their homes on the coasts. Because these customers have to get out-of-network service regardless of where they buy insurance because they divide their time between two homes, they buy the New Mexico insurance because it is cheaper. It is cheaper because medical costs are lower in New Mexico than on the coasts. A New Mexico-based insurer will calculate rates based on a New Mexico customer using New Mexico services only to find itself paying for expensive care in New York.
There are customers and physicians who are skeptical of the HMOs that will replace the PPOs. HMO plans have evolved a great deal over the years, but early on, physicians found HMOs to be heavy-handed in their reviews of their work and in their authorizations of care. In addition, the pay wasn’t as good as the fee-for-service arrangements HMOs attempted to replace.
In the late 1990s, physicians launched an effective media campaign to discredit HMOs. The myth got started that a high-school dropout sitting at a computer screen was dictating to the doctor what could and could not be done for a patient. Doctors argued, with some evidence on their side, that HMOs made money only to the extent that they denied care, however necessary it might be. Candidates in the 1998 elections campaigned to improve regulation of HMOs, and the television airwaves were full of political commercials featuring patients whose lives were ruined when an HMO denied treatment.
The HMO approach is predicated on the reality that an insurance company has data from thousands or millions of patient encounters that can be mined to determine what helps patients and what doesn’t. Insurers believe that if some level of trust can be established among providers, HMOs and patients, the companies’ data and technology in the hands of a receptive physician will improve the quality of care and lower costs.
HMOs, responding since the late 1990s to regulatory pressure and customer dissatisfaction, have tried to position themselves as benign guides that will help you through the jungle that is health care. You don’t want care you don’t need, and you want the care that you do get to be inspired by the best evidence available. HMOs offer to put their considerable resources at the disposal of your doctor so that everyone in collaboration finds the right path to health.
That’s the story this week, anyway. Depend upon another insurer, regulator, politician or medical practice to jolt the market yet again, and sooner rather than later.
UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or firstname.lastname@example.org. Go to www.abqjournal.com/letters/new to submit a letter to the editor.