Decoding Health Insurance Alphabet Soup
The Difference Among PPO, HMO and High-Value Networks
PPO, HMO, HV – health insurance is a mess of acronyms. Even if you’ve had health insurance for years, you may not know what this alphabet soup really means. I can help with that.
In general, Preferred Provider Organization (PPO) networks seek to include as many providers as possible. Blue Cross’ PPO network includes about 95% of all hospitals in Louisiana and roughly 99% of all physicians. It includes many different labs and imaging centers. Often, plans built on PPO networks have relatively lavish drug coverage. Because of the security and choices PPO-based products offer the customer, they are extremely popular in the employer-provided coverage world, and are still offered in several states on www.healthcare.gov. That’s the good news.
The bad news is that when you, the customer, gets maximum flexibility and coverage, you tend to use maximum healthcare. As an economist, I call this “maximizing your utility,” which is an entirely rational thing for you to do. Unfortunately, maximum utility often means maximum costs.
PPO networks historically have also done little to help patients identify which providers are the most effective or operate most efficiently. Our PPO network and many others is “any willing provider,” so as long as doctors/clinics meets licensing standards and want to be in the network, they’re in. While this means a larger network, it also means we can’t restrict providers or allow only those with the top quality scores to join, which we can in our other network types. PPO networks were sort of a consumer-backlash against the more restrictive HMOs (we’ll get to those in a second) that were very popular with employers in the mid-1990s. By 1995, some 40% of all insured people were in an HMO. It’s a lot less today.
When they started, Health Maintenance Organization (HMO) networks incorporated some new ideas like gatekeeper primary care (your primary care doctor controlled what specialists you could see, surgeries you could have and tests you could run), tighter networks and low-to-no benefits for any care not rendered at a network provider. The whole goal of the HMO movement was CONTROL of both costs and quality, although in the 1990s it was mostly cost-focused.
HMOs are still around today, although they don’t look like their 1990s predecessors. They tend to have smaller networks, with fewer or no benefits for non-network provider services. They tend to be more restrictive in which providers are included; HMOs still look for value to be successful, and tend to contract only with certain providers who meet defined quality metrics. Because of this, their networks are much smaller than PPO plans. In general, plans with HMO networks are less expensive than similar coverage in a PPO network plan.
New High-Value or select networks take this concept to another level. A variety of national guides now make it possible to score medical providers based on their costs to provide services AND their probability of following established procedures when they treat a patient. The more effectively and efficiently medical providers operate, the more valuable they are to their patients and health insurance companies.
Since High-Value network plans try really hard to bring in providers that rate in the top 25% for efficiency and effectiveness, they tend to have the smallest number of providers in the networks. This can help keep down the costs of treatments. Since more than 80% of all individual insurance premiums pay for actual healthcare, insurers, including Blue Cross, can offer plans with this type of network to customers at lower premiums than HMO or PPO plans. Folks who don’t really understand how this is done may call these High-Value networks “skinny” or “narrow.” If you shop on www.healthcare.gov, you will see the high-value network plans (like Blue Connect or Community Blue in Louisiana) have lower premiums but cover the same medical treatments and have similar or lower cost sharing for the members. But, those members have a much smaller network they must stay in to get care and have the benefit of lower costs. Again, it is all about which medical providers are covered.
As you shop for health insurance, it is absolutely critical that you know, BEFORE you push that “purchase” button, which providers, hospitals and labs that you want to use are included in your plan. It’s possible that your favorite doctor, whether primary care physician, family practitioner, internist or OB/GYN, is no longer included on your “in-network” provider list.
So far, the federal government has standardized benefits and set limits on cost sharing, but the provider network variation between insurance companies or plans can be large. Make sure you use each plan’s “find a doctor” or “find a hospital” feature before you settle on one plan.
You’ll be glad you did!