PPO Health Insurance

Credit: Carlos Castillo via Flickr under Creative Commons. PPO Health insurance plans

November 2019

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Despite some positive initial results during its first few months, the Affordable Care Act (ACA) has actually caused a fair bit of damage to the New York State health insurance market. Especially when it comes to the variety and cost of available PPO health insurance plans.

The biggest and most significant health insurance casualty of the ACA in New York State have been the Preferred Provider Organization (PPO) health insurance plans, which are now almost all but extinct in New York State because of the ACA. There are of course a few exceptions to this. We at Vista Health Solutions are still able to sell a few PPO plans, learn more here.

What is a PPO health insurance plan and why does it matter?

For those who may not know, a PPO health insurance plan is a type of managed care plan that provides medical services through a contracted network of health care providers.

Among other managed care plans, PPOs give the most flexibility and freedom. PPO plans allow you to go to specialists within the network without having to go through a PCP (primary care physician) for a referral. There is no need to select a PCP.

What that means is if you’re enrolled in a PPO health insurance plan you can see any doctor or specialist in the network, without first needing to get a referral from your PCP. Another benefit of PPO plans is that they also typically provide limited coverage for out of network for treatment.

Because of that extra flexibility when it comes to in network options, and the peace of mind of out of network coverage, PPO plans in New York State have been a very popular health insurance choice. This is especially true among New York’s small business owners and the self employed.

At this point you might be thinking that a PPO plan sounds like a pretty good deal. Maybe you’re even ready to sign up for one yourself. The bad news is that the majority of New Yorkers no longer have the option to join a PPO plan. In fact the ACA has caused a nationwide mass extinction of the PPO plan, especially in New York State.

PPO meets the Affordable Care Act

Remember back last year when the media was abuzz about the ACA cancelling many people’s long held, older health insurance plans? The vast majority of those plans that were cancelled were individual PPO plans. The reason that these plans got the axe was because they did not meet the new mandated standards of the ACA.

That could mean a variety of things, but typically it meant that the plans did not meet the coverage standards of the ACA. Under the ACA all non-grandfathered health insurance plans must provide coverage for medical services across 10 care categories known as Essential Health Benefits.

Sadly, rather than replacing the older, less comprehensive PPO plans with new PPO plans compliant with ACA standards, most New York health insurance companies dropped PPO plans altogether. So unless you are enrolling in a grandfathered PPO health insurance plan, you’re out of luck in New York State.

So what other plans are left?

Despite a clear demand in New York State for PPO health insurance plans, they are not offered at the New York State Health Insurance Exchange. So what is left?

Well what is left are generally Health Maintenance Organization style plans at the New York State health insurance exchange. An HMO plan is a type of managed care plan that provides health care through a network of contracted health care facilities and providers like physicians, dentists, hospitals, and pharmacies.

While it might at first sound similar to a PPO health insurance plan, it is not. For an HMO plan you must select a primary care physician (PCP) within its network of providers, which is usually smaller than a PPO network. This is a required part of the process as the PCP acts as your gatekeeper to the rest of the health plan’s network of doctors and specialists. Meaning that you cannot see or visit any other part of the network without first getting a referral from your PCP. This kind of gatekeeping with an HMO plan makes it a much cheaper option for health insurance companies than a PPO plan.

Why are HMO plans Cheaper?

HMOs are cheaper simply because they have a smaller network of doctors and hospitals. A health insurance company needs to make fewer reimbursement agreements, and thus spends less money to bring each provider on board.

Additionally, with your PCP as the gatekeeper to the rest of your network, the insurance company can rest assured that you’re only going to a specialist when you really need the care. Rather than you going to see an expensive specialist without truly having a pressing medical reason. For someone in a PPO plan, their copay might be the same at both their primary care doctor and the specialist, but the insurance company is likely reimbursing the specialist much more than the primary care physician. Added up over time and across the population you can see how health insurance companies could lose money on PPO plans.

And naturally if you’re in business for a profit and you’re losing money on something the reaction is to increase the price of it. Which is what insurance companies might have done with PPO plans if not for the ACA.

One of the primary stated goals of the ACA was to bring America’s health care spending under control. Because of that pressure there are regulations baked into the legislation that put enormous pressure on insurance companies to keep prices down, and at a certain percentage level for those within particular income brackets.

Essentially for insurers, the ACA tells them they need to offer more coverage, to more people, for less money. In order to stay ACA compliant insurers have been scrambling to cut costs and still stay in the black. That means no more expensive PPO plans with their large network of providers, and out of network benefits.