ACA Drives Popular Plans Into Extinction
Preferred provider organizations (PPOs) provide consumers with flexibility. With a PPO plan, patients don't need a primary-care physician, in-network and many out-of-network health-care services are covered, and referrals are often not required to see a specialist. Historically, many have chosen PPOs over rival plan types, such as health maintenance organizations (HMOs) and exclusive provider organizations (EPOs).
Unfortunately for millions of Americans, PPOs are being driven out of the Obamacare marketplace. According to a report by the Robert Wood Johnson Foundation, only 33 percent of the "790 unique PPO plans offered in 48 states by 93 different carriers" in 2015 are still available to consumers in 2016. RWJF says 28 percent of the plans were dropped and 39 percent were reduced.
This troubling development is particularly hard on patients who travel long distances to see out-of-network specialists, such as many with cancer. These patients will be forced to find new doctors who operate in-network in order to receive coverage from an Obamacare plan.
Some have speculated that demand for PPO plans has lessened because an increasing proportion of exchange consumers are lower-income Americans looking for the cheapest option available. HMO and EPO plans tend to have lower prices because they are generally less flexible.
While there may be some truth to this claim, the real culprit behind the falling number of PPO offerings is the poor design of the Affordable Care Act. The stated goal of the ACA is to provide quality health insurance to all Americans, including those who ordinarily cannot afford to pay for it and those with preexisting conditions. The primary way in which the ACA attempts to accomplish this is by offering subsidies to those with low incomes. The ACA also requires all people to purchase health insurance, on the theory that younger Americans will help pay for the additional costs associated with sicker and older consumers.
The problem is that many young, healthy people have chosen not to enter the health-insurance marketplace because the plans are too expensive. Many others look for the cheapest plans possible, significantly reducing the amount of money paid to insurance companies by consumers who won't use many benefits.
Meanwhile, sicker patients and those with lower incomes have taken advantage of the government subsidies provided to them and have signed up for health-insurance policies at relatively high rates. This has caused many insurance companies to see lower profits or to endure losses.
In Texas, which has one of the largest health insurance marketplaces in the nation, more than 360,000 people lost their health-insurance plans in 2016 after Blue Cross Blue Shield of Texas announced it would no longer offer Blue Choice PPO plans. BCBS said its decision stemmed from the fact that it had paid out $400 million more in claims than it had received in premium payments.
PPOs provide better benefits than HMOs or EPOs, which makes them more expensive to operate. By removing them from the marketplace, BCBS and other insurers hope to stop bleeding cash.
It's undeniable that the health-care system in America was not working well before Obamacare, but the law has actually made the health-insurance marketplace significantly worse for most Americans. There are fewer quality options available today than at any time in recent history, and health-insurance prices are continuing to grow at staggering rates. With fewer PPO plans on the market, a trend that will likely continue over the next few years, the situation for consumers will only get worse.
Justin Haskins is executive editor of the Heartland Institute and the author of Heartland's weekly Consumer Power Report.