The Affordable Care Act legislation created unprecedented levels of reform in both the individual and group health insurance marketplace, ushering in a new era of government regulation upon individual and group health insurance plans alike. On the one hand, millions of individuals and families have gained access to health insurance they might not have otherwise been able to afford or qualify medically for because of preexisting medical conditions. However, on the other hand, this legislation has brought about some really negative unintended consequences. The individual health market in particular has been significantly impacted by this legislation and changes will need to be made by future law makers in order to foster more competition which would change the trajectory of prices for health insurance downward. Specifically, one of the most damaging effects of these regulations for consumers of individual medical insurance has been the shift out of PPO networks into more restrictive HMO networks and will be the topic for today’s discussion.
Prior to Obama Care legislation enactment, most individual and family medical insurance plans were offering health insurance packages in most states under a PPO network model. PPO’s stand for Preferred Provider Organizations. These PPO networks typically would reimburse providers at a much higher rate than those of HMO networks. So, as a consequence, many more providers were willing to accept these individual medical plans because the provider payments were much larger than HMO’s. HMO plans stand for Health Maintenance Organizations. Fast forward to 2018 and this trend has completely reversed. In Texas for example, there are now only a handful of ACA complaint carriers willing to offer individual coverage and they are all HMO networks. This mainly stems from the fact that insurance carriers were no longer able to effectively screen and manage their risk after Obama Care legislation enactment. This forced carriers to scrap their open access PPO networks in favor of more restrictive and lower paying HMO networks in an attempt to mitigate an enormous surge in claims.
The main reason PPO plans were so much more valuable is because they had provisions allowing reimbursement to out of network providers. This would mean an individual who lived in another State, for example, who came down with a terminal illness like cancer could come to M.D. Anderson in Houston Texas and receive treatment and be covered by their insurance policy even if the provider happened to be out of network. Typically the PPO plans would charge higher deductibles and co insurance for out of network charges but, the insurance company would pay the claim none the less. In early 2014 and 2015, as Obama Care legislation became completely phased in, many large national insurance carriers were offering PPO plans in Texas and other states to anyone under 65 regardless of pre-existing conditions. Millions of people would then join these PPO networks and use the most expensive providers for treatment of chronic illnesses, even if it meant going out of network. This trend led to adverse claims experience by these national insurers, resulting in the elimination of all PPO plans in Texas and other states by 2017.
Ironically HMO plans, while at one time were non-existent in the individual marketplace in Texas, would ultimately become the only ACA compliant policy model on the market. HMO plans are considered much less valuable health insurance primarily because of their restrictive networks. Most HMO plans require patients to obtain referrals to see specialists and Primary Care Doctors are usually assigned to the patient. This takes a lot of freedom and control away from the patient and puts it in the hands of the insurance companies who offer them. Another troubling fact about HMOs is they pay no out of network benefits. So, if there’s a provider you really want to see, such as M.D. Anderson, who is out of network, your HMO plan will not pay anything toward these claims. As you might imagine, the HMO networks do not share the same set of doctors that a high quality open access PPO network will offer its patients. The only way insurance companies were able to offer insurance after 2016 was to limit the providers’ reimbursement rates by way of HMO implementation and PPO elimination. The Affordable Care Act was designed to provide more Americans with more access, affordability, and coverage for a wide range of conditions and illnesses. Many of these same people who for the first time ever could obtain a health insurance policy could not keep their existing doctor because their provider wouldn’t accept their HMO network.
Many insurance carriers recognized this dilemma early on and designed ACA plan alternatives to offer affordable insurance with an open access PPO as an option. These plans work differently than ACA and do not cover all that ACA policies do. However, they do offer a viable alternative for those individuals who make too much money to get a subsidy under ACA but cannot afford the steep premium increases brought on by the Law and who are looking for a PPO with access to a wide variety of providers. These alternate plans will pick up more traction in the years ahead as the individual mandate will be lifted from individuals and small businesses alike in 2019 and beyond. This individual mandate requires consumers to carry an ACA complaint policy or pay a penalty on their tax return. This will make these alternate plans even more affordable as consumers would only have premiums to contend with and not penalties imposed by the government.
IHS Insurance Group is an independent insurance brokerage with an office in Tomball, Texas. However, we are licensed in a number of states: Texas, New Mexico, Arizona, Louisiana, Virginia, Oklahoma, Tennessee, Arkansas, Colorado, and Missouri. We shop the market for Individual medical insurance, Medicare Supplement, Medicare Part D, and long term care insurance. Please call us today for a no obligation quote. One of our licensed agents will gladly assist you in selecting the most appropriate insurance product based on your personal circumstances. We will also take the time to explain coverage and benefits so you completely understand the insurance product that fits best for you!