Get the Most from Your PPO.
With this increase, HMO pricing is creeping closer to that of more traditional plans, such as Preferred Provider Organizations (PPOs). With costs equalizing, a growing number of employers have moved to PPOs. In fact, after years of double-digit HMO growth, PPOs outpaced their managed care counterparts in 1999. According to the American Association of Health Plans, there are now eighty-nine million people participating in PPOs compared to eighty-one million in HMOs.
As the benefits of PPO plans--freedom, flexibility and accountability--attract more takers, employers are looking for strategies to manage the costs of their new benefits programs.
Making PPOs Affordable
The turmoil and uncertainty of the health care industry makes securing discounts from PPOs difficult. There are, however, a number of ways employers, working with their third party administrators (TPAs) and other benefits consultants, can undertake to ensure they secure the maximum value from a PPO plan design.
* Negotiate hospital rates based on a per diem (fixed rate per day) basis without outliers. An outlier is the excess amount a hospital stay costs over the average expense. Some hospital contracts will revert to a percent-off retail once the total bill reaches this outlier, a relatively low level. With retail rates set by the hospital, this negates the value of the contract. If your PPO hesitates, push to have rates closely aligned with Medicare reimbursement levels.
* Tie physician contracts to Medicare reimbursement levels. For example, physician reimbursement would be 115 percent of the Medicare allowable.
* Reimburse out-of-network claims at Medicare levels. It is important to provide a flexible PPO network that allows employees to go outside the network when needed. Employees must understand, however, that because doctors are not obligated to accept Medicare rates, they may be responsible for additional costs.
* Institute a plan that encourages appropriate utilization. Cost-sharing strategies, such as higher copayments and deductibles, help employees understand that they need to take an active role in managing their health care costs. Fair copayments of $10 to $20 can prevent unnecessary utilization and defray employer expenses.
* Develop criteria to judge PPO network performance. Work with your TPA to develop these measures based on market conditions. Talk to your PPO about your expectations and monitor contract performance on a quarterly basis.
* Identify strong regional PPO networks. Depending on the location of employees, smaller regional PPOs may be more willing to negotiate lower fees and additional services.
* Accept PPO recommendations for holding down prescription drug programs. Managing prescription drug programs is one of the key challenges facing health care today. While program restrictions tread on sensitive ground, PPOs today have a variety of methods for holding down costs, such as mail-order pharmacy and higher copays for "nonpreferred" medications.
* Use the highest quality PPO network you can find. While keeping costs low is important, the lowest price does not always translate into the highest quality. A network with limited or lower quality providers may not be used effectively by your employees, which could increase overall expenses.
The move to make PPOs affordable is critical. According to the American Association of Chambers of Commerce, the average annual cost of employee benefits programs is now some $4,900 for each employee with dependents. Working with PPOs to negotiate the best possible rates can help manage these expenses. When you combine these efforts with solid stop loss coverage, TPAs that will administer the program effectively and efficiently, and employees educated on the costs and values of health care benefits, you can rest assured you are getting the most from your PPO program.
Ed Ueeck is managing director of Pacific Risk Management Services, a strategic business unit of Pacific Life and Annuity, based in Fountain Valley, California.
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|Title Annotation:||preferred provider health organization|
|Comment:||Get the Most from Your PPO.(preferred provider health organization)|
|Article Type:||Brief Article|
|Date:||Nov 1, 2000|
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