What’s Happening to Obamacare’s PPOs?

Health plans that will pay for out-of-network care are disappearing from the insurance exchanges. Here’s why.

Obamacare PPO decline.
Many Americans who aren’t old enough to be eligible for Medicare still obtain health insurance coverage through their employers.

Photo by StockLite/Shutterstock

Last month, the Robert Wood Johnson Foundation released a report titled “Burnt Offerings? PPOs Decline in Marketplace Plans.” The title said it all.  Preferred Provider Organizations—that is, health insurance that will pay for both in-network health providers as well as out-of-network ones—are fading on the health care exchanges established under the Affordable Care Act.  

Instead, consumers buying insurance on the exchanges are increasingly finding themselves limited to more restrictive plans—narrow-network health maintenance organizations and exclusive-provider organizations—which offer extremely limited coverage when they want to visit out-of-network medical providers. And many patients aren’t thrilled. “I feel deserted,” one cancer patient, suddenly cut off from long-time doctors, told the Houston Chronicle this month. “This is my life we’re talking about,” another told the paper earlier this year.

Yet the issue of decreasing PPO offerings was all but lost amid the flurry of ugly headlines for Obamacare last month, led by UnitedHealth Group’s sudden announcement that it might pull out of the exchanges entirely in 2017. But the fading of PPOs from the exchanges may very well be a reason why the ACA continues to experience public-perception issues, even as the number of Americans without health insurance has fallen dramatically since the enactment of the law.

“This is a serious problem if you think one of the purposes of the Affordable Care Act is if you like your doctor, you can keep your doctor. That’s no longer true in many areas of the country,” Seth Chandler, a law professor at the University of Houston’s Health Law and Policy Institute, told me.

So what’s happening? The PPO problem is rooted, in part, in individual consumer behavior. Many customers on the exchanges are going for the low monthly premiums, and they’re willing to take a narrowly restricted medical network that doesn’t compensate for out-of-network charges except in an emergency as the price they pay for the lower monthly bill. For those who are healthy and unlikely to go to the doctor that often, that’s a rational, financially prudent decision.

But not everyone has perfect health. No surprise, they’re the ones most likely to seek plans that are likely to cost more money but offer greater benefits in return. “People who have high medical expenses value continuity of care the most, they see the doctor the most, they have complex medical situations,” Chandler says. That drives the prices up, potentially pushing even more purchasers away. As for the insurers, many claim to be losing money on these plans. Blue Cross Blue Shield of Texas, for instance, says that in 2014 it paid out $400 million more than it received in premiums for a PPO plan, one that it’s no longer offering.

In some ways, what’s going on in the individual health insurance market is not dissimilar to the situation faced by airlines. Everyone likes to decry rock-bottom airplane service, but there’s a reason it continues: Again and again, consumers opt for it via bargain airlines and low fares. But health insurance is different in one key way: When it comes to flying, first-class tickets are easy to find. On many state exchanges, individuals seeing to buy coverage face a situation akin to every airline that offers first-class service dramatically cutting back, leaving almost everyone to the mercy of discount airliners.

As of this year in New York City, individuals can’t sign up for a PPO either on or off the exchange; out-of-network coverage is only available through an employer plan. In the Houston area, according to the Houston Chronicle, there were 19 PPO plans available on the federal exchange in 2015; in 2016, there will be none available on the exchange and very limited access off the exchange for individuals. All together, the online insurance site GoHealth told CNBC it tracked a 41 percent decrease in PPO offerings on the federal exchange between 2015 and 2016.

Even the PPOs that continue to be offered on the exchange markets are often pared back versions of the model. In Illinois, for example, Blue Cross Blue Shield of Illinois canceled a popular and rather expansive PPO in favor of one with more limited coverage. Prominent hospitals like the University of Chicago and Northwestern Memorial are no longer in the network. In addition, the Chicago Tribune reported, the out-of-network deductibles also increased, with no out-of-pocket hard stop, potentially leaving users on the hook for massive bills should they get ill. This is also a growing practice. The Robert Wood Johnson Foundation found the number of silver-level—that’s midtier—PPOs on the marketplaces with no maximum out-of-network pocket limit increased from 14 percent this year to 30 percent for 2016.

People don’t take the constraining of their health care choices lightly. In the wake of the Clinton administration’s failed attempt at health care reform in the 1990s, many companies promoted health maintenance organizations to their employees as a way to save on costs. Within a few years, HMOs were practically Hollywood villains, getting trashed everywhere from ER to the film As Good As It Gets (in which Helen Hunt’s character memorably exclaimed, “Fucking HMO bastard pieces of shit!”).

So why isn’t this becoming a bigger public issue this go-’round? First, it’s a political orphan. Republican-controlled Congress is so intent on demonizing the Affordable Care Act that it won’t take steps toward actually improving it for anyone. And Democrats, weathering the onslaught on the health care expansion, are measured when it comes to admitting to problems within the law.

Second, to be fair, it’s not like everything is getting overlooked. A number of states have taken on the issue of balance-billing—when patients are charged the difference between what their insurance will pay and what a doctor or hospital not in their network bills—at least when it comes to emergency care. But that sort of effort won’t ease access to more routine out-of network care. In 2014, New York state officials briefly contemplated requiring all insurers offering plans on the state exchange to offer out-of-network coverage, but quickly shelved the plan amid fierce insurance-industry pushback.

But perhaps most important, many Americans who aren’t old enough to be eligible for Medicare still obtain health insurance coverage through their employers. A majority of them are still offered and choose health insurance plans that allow them to receive some reimbursement for out-of-network care, should they choose to use it. If that changes, it’s possible we’ll hear a louder clamor for better access to PPOs or other plans that allow people to freely choose their own doctors, both on and off the exchanges. Could it happen? Katherine Hempstead, the author of the Robert Wood Johnson Foundation report, says she’s certainly concerned: “I think a lot of people feel the exchanges are the canaries in the coalmine.”