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Premiums Rise Faster For Flexible Health Plans Than For HMOs

Karen Stolper/Photolibrary RM/Getty Images
Karen Stolper/Photolibrary RM/Getty Images
Karen Stolper/Photolibrary RM/Getty Images

Consumers seeking health policies with the most freedom in choosing doctors and hospitals are finding far fewer of those plans on the insurance marketplaces. And the premiums are rising faster than for other types of coverage.

The plans, usually known as preferred provider organizations or PPOs, pay for a portion of the costs of out-of-network hospitals and physicians. They are the most common type offered by employers, and some consumers in the individual marketplaces find them more appealing than health maintenance organizations and other policies that pay only for medical facilities and doctors with whom they have contracts.

In Kelly Filson's Indiana hometown of Plymouth, all but two of the 75 insurance policies available on the health marketplace for 2016 are the restrictive type. Only one of those would provide substantial coverage to the two hospitals her family wants access to next year, a local community facility and a children's hospital where her 12-year-old will need special surgery. But at $1,109 a month, the policy is twice as costly as the cheapest plans in the area.

"I'm just trying to figure out what we can feasibly afford. That's the bottom line," said Filson, a music teacher.

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A Kaiser Health News analysis of costs in the three-dozen states selling policies through the federal HealthCare.gov website found a sharp difference in premium prices between plans that offer out-of-network care and those that don't.

The analysis compared the monthly premiums for the least expensive silver-level plans — the category that are the most popular purchases — for a 40-year-old in each county.

While the average premium for the least expensive closed-network silver plan — principally HMOs — rose from $274 to $299, a 9 percent increase, while the average premium for the least expensive PPO or other silver-level open access plan grew from $291 to $339, a 17 percent jump, KHN found. The cost variations hold true for any age.

Katherine Hempstead, who studies health insurance for the Robert Wood Johnson Foundation, said there are fewer PPOs because insurers found them more expensive to offer: Out-of-network doctors generally charge more than the contracted rates paid to in-network providers by insurers. And, even though insurers pay only a portion of an out-of-network bill, the costs add up.

"Out-of-network providers were causing carriers to lose a lot of money, and they really needed to put their thumbs down on that," Hempstead said.

Hempstead found that there will be fewer or no silver-level PPOs in 22 states next year. Federal records show there will be none in Miami and most Florida counties, much of Texas, New Mexico, New York and many counties in Mississippi and South Carolina.

The price gap between PPOs and HMOs is growing in many places where both are offered. In Chicago, the least expensive silver PPO next year will cost $270 a month, $75 more than the least expensive silver HMO, and 27 percent more than the cheapest silver plan costs now. Meanwhile, the price of the least expensive silver HMO in Chicago is dropping by 12 percent.

In Salt Lake City, the premium for the only silver PPO is rising by 30 percent, nearly four times the increase for the least expensive HMO.

In Philadelphia, the cheapest silver PPO will be $389, $113 more than the cheapest HMO. This year, Philadelphians wanting a silver open-access plan had to pay just $66 more. As in many places, insurers also are selling different bronze, gold and platinum PPOs (the metals indicate how the insurer and patient divide the cost of care), but the cheapest plan in each tier in Philadelphia is an HMO.

In Houston, the only plans available through the federal exchange have closed networks. Blue Cross Blue Shield of Texas, which offered a PPO plan in Houston for 2015, cited rising costs as a reason it will not offer any open-access plans next year. There is at least one PPO that consumers can purchase directly or through a broker, offered by the Memorial Hermann Health System. But it isn't listed in the federal marketplace offerings, so premium subsidies aren't available.

"Everyone is up in arms," said Jo Middleton, a Houston insurance broker. "I do not have a single client who is happy. They want PPOs and can't get them. They want the flexibility."

The biggest complaint, she said, is not that the HMOs don't allow out-of-network coverage, but that their networks are too small.

"If you are someone who needs several doctors and several specialists, it's difficult to find a network they are all in," Middleton said. "In many cases, the doctors may be in a network but only have admitting privileges at a non-network hospital. In the 11 years I've been in the business, this is unprecedented."

None of the plans available through the federal exchange in Houston include the city's well-known MD Anderson Cancer Center in their networks. "It's a huge problem," said insurance broker J. Casey Lowery. "If you're a cancer patient, think about it. All of a sudden you have to switch doctors. Or, if you want to stay with a doctor because he saved your life, and now you're in an HMO, you have no coverage."

Dan Fontaine, an administrator at MD Anderson, said some insurers didn't invite the cancer center into their networks. Others offered payment rates that, he said, "we don't consider serious" because they were too low "and oftentimes less than what Medicare or Medicaid pay us." He said the center was trying to make arrangements with insurers for patients who are in treatment now.

Plans with out-of-network benefits are not disappearing everywhere. Alaska, Arkansas and Wyoming are bucking the trend by only offering PPOs. Out-of-network costs even with PPOs can be prohibitively expensive because many PPOs will cover only a minority of costs, diminishing the difference from HMOs. Also, people who qualify for government premium subsidies can be insulated from the full cost of a PPO.

Allen Gjersvig, an executive at the Arizona Alliance for Community Health Centers, says one PPO in the state requires approval before seeing a specialist — a restriction often associated with HMOs — while there are HMOs that don't mandate pre-approval of specialist visits. "The meaningfulness of HMO and PPO is starting to really blur," he said.

Kaiser Health News is a service of the nonprofit Kaiser Family Foundation. Neither one is affiliated with the health insurer Kaiser Permanente.