Study suggests we like HMOs as long as participation is voluntary
ANN ARBOR, Mich.—People are happy in an HMO as long as participation is voluntary—that is, as long as they aren’t forced to participate in an HMO instead of a less-managed care plan like a PPO, new research suggests.
Whether employees live in a geographic region where HMOs have a good reputation might also matter, the University of Michigan study says.
HMOs and PPOs are two of the main kinds of managed care insurance plans. An HMO, or health maintenance organization, provides prepaid health care coverage through a network of contracted hospitals, doctors and other service providers. An HMO often requires patients to pick a primary care physician who acts as a gatekeeper by authorizing referrals and other services, and care for out-of-network doctors isn’t generally covered.
A PPO, or a preferred provider organization, is a group of doctors, hospitals and other providers who give care to a certain group or association. Patients can use out-of-network doctors but coverage is often limited and the plan is not prepaid.
The study looked at transition and enrollment among insurance plans in 2005, the year that the two insurers serving U-M employees decided to offer PPOs for the first time. The results showed that most of the new PPO customers switched from less-managed care plans and not from other HMOs, as would be expected based on national trends. HMOs are more heavily managed and sometimes get a bad rap for that reason.
The results suggest that the perceived dislike for HMOs could stem from the context in which they are offered, rather than from actual or perceived deficiencies in the HMO system, said Richard Hirth, professor of health management and policy at U-M. In addition to giving employees a choice of insurance plans, the study suggests that employees might be more accepting of HMOs if they reside in a geographic region where HMOs have a good reputation.
“Because PPOs drew few enrollees from HMOs, there was little evidence of a backlash against managed care in the context of University of Michigan employee group,” Hirth said.
In 2005, when the PPOs were first offered, the university was contracting with five insurance companies to offer a wide range of benefit plans to its employees. Two of those insurance companies decided to add PPOs. The U-M employees who were in HMOs when the PPOs were offered had chosen the HMO from an array of less-managed care plans also in existence, such as fee-for-service and point-of-service plans.
Offering PPOs served the strategic interests of the two insurers well. Each insurer offered a PPO, but kept the other plans, Hirth said. Additionally, offering a PPO may have saved the traditional fee-for-service insurer serving the U-M group, because enrollment in that plan had nosedived to nearly zero. Enrollment for that carrier increased after it added PPOs.
Similarly, offering the PPO helped prevent a significant loss of enrollment for the insurer which offered a more expensive, point-of-service plan, Hirth said.
The study, Insurer Competitive Strategy and Enrollment in Newly Offered Preferred Provider Organizations (PPOs), appears in the next issue of the journal Inquiry. Co-authors are Kyle Grazier and Edward Okeke of the U-M School of Public Health and Michael Chernew of Harvard University.
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