Preferred Provider Organizations (PPOs) are the most prevalent type of commercial health plan in the United States. Originally, the “preferred” part of PPO actually meant something.
A select group of providers and hospitals were chosen to provide care to members. But in the 1990s, that all changed. Without rehashing the history of managed care PPOs adopted an open access/go- anywhere-you-want approach. This strategy has played a significant role in the current state of healthcare in the U.S., where costs are out of control and PPOs have become one-size-fits-none.
Today’s PPO market
In many markets, most of the available providers are “preferred”, meaning they are in the PPO plan. Earning the “preferred” label is akin to getting a participation medal at the school track meet. If every provider is preferred, the title becomes meaningless
How did we get here? The promise of the PPO was twofold. It was supposed to offer broad access — the ability to choose your doctor or hospital from an expansive everyone “in network” — along with the lowest rates for care possible. It’s the proverbial “have your cake and eat it too” approach. Here’s the problem: PPOs have failed to deliver on both cost and quality. In fact, the PPO model has resulted in decades of cost increases with no end in sight.
According to the Kaiser Foundation, employee healthcare premiums have risen 47% and deductibles have risen 68% in the past decade, compared to an only 31% increase in wages. The American Public Journal of Health has reported that approximately 530,000 families file for bankruptcy each year because of medical bills. How many of these are your employees?
Rise in premiums in the last decade
Rise in deductibles in the last decade
Adding to the PPO problem
For years, rather than acknowledging the PPO model is severely broken and a root cause of the healthcare problem, the industry has sought to add on services for fear of disrupting the status quo. Wellness incentives. Transparency tools. Activity trackers. Health screenings. The list goes on and on. While these well-intended programs have increased member engagement, they have failed to deliver real change in healthcare. It has become increasingly apparent that we’re not going to “health app” our way out of this problem.
Healthcare costs have continued to rise year after year for employers and their employees, people are becoming more fed up with the results, and are looking for new health plan solutions.
Is the PPO model failing your employees?
Meet John Smith. He’s worked for the same company for 8 years and brings home $60,000 annually after taxes. While his wages have remained stagnant, his company’s healthcare costs have steadily and his employer recently introduced a high-deductible PPO plan.
The Smith family — John, his wife and two school-age children — now have a $6,000 deductible and a $12,000 maximum out-of-pocket. They also have a $1,100 monthly mortgage payment, student loans and credit card debt. If the Smiths had a high-cost medical bill, what would they do? Without enough money in their savings to cover out-of-pocket expenses, they might have to make difficult decisions on what bills to pay, what necessities they can forego or worse, declare bankruptcy.
The PPO model is not only failing to deliver better health outcomes, it’s also having a negative effect on the financial health of employees, and bringing financial hardship to those like the Smiths. Might they would be willing to try something new in exchange for serious savings?
Reaching the PPO tipping point
As a former HR executive and CEO responsible for the healthcare costs of our employees, I’m seeing this shift away from PPOs firsthand. Companies that have embraced traditional PPO plans for decades are realizing the impact that these plans are having on their employees, their employees’ families and their bottom line. They are looking for solutions that put control back into their hands, and offer real savings for their business, and to families like the Smiths.
If this sounds familiar, Imagine360 can help. Let’s work together to put you back in control. We’ll listen carefully and tailor a comprehensive plan to meet your goals. You’ll get the coverage you want, with high-quality care at a fair price.