preferred provider organizations: the employer perspective
TRANSCRIPT
22002 National Survey of Employer-Sponsored Health Plans
Today’s Agenda
A short history of the PPO
Purchaser Expectations
PPO Evolution - Where are we?
Challenges of the current system
32002 National Survey of Employer-Sponsored Health Plans
Cost pressures are unrelenting
Demographics – “baby boomers” raising average age of labor force
Technology – medical costs rising as new diagnostic equipment, drug therapies and other treatments are introduced
Providers – new-found negotiating strength
Vendors – reduced competition and shareholder mentality
42002 National Survey of Employer-Sponsored Health Plans
Sharpest health care cost increase in over a decade…
6.9%
18.6%
16.7%17.1%
12.1%
10.1%
8.0%
2.1% 2.5%
0.2%
6.1%7.3%
8.1%
11.2%
14.7%14.0%
-1.1%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
pro
ject
ed
52002 National Survey of Employer-Sponsored Health Plans
HMO enrollment drops to 1996’s level;PPOs gain enrollment
49%44%41%39%
36%
32%29% 31%
35%34%32%32%31%
14%15%17%
18%19%22%
18%
6%6%8%
11%13%14%
22%
1996 1997 1998 1999 2000 2001 2002
PPO
HMO
POS plan
Traditional Indemnity
62002 National Survey of Employer-Sponsored Health Plans
What happened to the HMO enrollment?
46% of employers report network disruption over the past two years, affecting 24% of their employees
Employers took steps to manage HMO cost in 2002
– Reduced the number of HMOs offered
– Raised physician, ER copays; added hospital deductibles
Faced with HMO network disruption, dropped plans, greater cost sharing, employees voted with their feet and changed plans
72002 National Survey of Employer-Sponsored Health Plans
HMO v. PPO Historical Trends
-2.0%0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%
1996
1997
1998
1999
2000
2001
2002
PPOHMO
82002 National Survey of Employer-Sponsored Health Plans
$4,542
$3,837$3,596
$3,909$4,072$4,494
PPO HMO
1999 2000 2001 2002
PPO vs. HMO cost difference
$5,220 $4,856
92002 National Survey of Employer-Sponsored Health Plans
Today’s Agenda
Challenges of the current system
A short history of the PPO
Purchaser Expectations…
PPO Evolution - Where are we?
102002 National Survey of Employer-Sponsored Health Plans
Impetus For Early Growth
Belief that HMO’s “skimmed” the best risks
Networks were larger and choice was the employee issue
Employers were experiencing double-digit healthcare inflation
Hospitals were willing to discount charges for patient steerage in competitive markets
112002 National Survey of Employer-Sponsored Health Plans
Changes in the ‘90’s
Steerage differentials expanded
Fee schedules for doctors and risk-sharing for hospitals were introduced
Physician and hospital credentialling became important
Point-of-Service (POS) plans were introduced as a competing product
HMO enrollment growth soared
HMO consolidation began
122002 National Survey of Employer-Sponsored Health Plans
Late ‘90’s
Backlash against managed care
PCP Gatekeeper concept questioned, as a solution in every market
Cost differential between products (HMO, POS, PPO) eroded in many markets
HMO’s became media and politician “whipping-persons”
– denied care v. quality of care
– administrative v. clinical solutions
The PPO (managed care lite) began reinventing itself
132002 National Survey of Employer-Sponsored Health Plans
Today’s Agenda
Challenges of the current system
A short history of the PPO
Purchaser Expectations
PPO Evolution - Where are we?
142002 National Survey of Employer-Sponsored Health Plans
The market responds…
HMOs become more like PPOs…
First step was introduction of “open-ended” product – the POS plan
“Open-access” products on the rise – offered by about 25% of employers
Major HMO drops medical necessity prospective review
PPOs become more like HMOs…
Risk-sharing arrangements with hospitals increasingly common
Rapidly adopting disease management programs
In-network physician copays have become the rule (85% of plans)
152002 National Survey of Employer-Sponsored Health Plans
IPA
HMO
P OS
P P O
Traditional
Indemnity
Traditional
Indemnity
P P O
P OS
IPA
HMO
Before: Accepted ideal was evolution to group/staff HMOs
Low
Cost
High
Low Degree of care management High
G roup/S taff
HMO
Traditional
Indemnity
P P O
P OS
IPA
HMO
162002 National Survey of Employer-Sponsored Health Plans
Today’s Agenda
Challenges of the current system
A short history of the PPO
Purchaser Expectations
PPO Evolution - Where are we?
172002 National Survey of Employer-Sponsored Health Plans
Health Care Marketplace Environment Consumers are insensitive to costs
0%
5%
10%
15%
20%
25%
30%
35%
40%
1970 1980 1990 2000 2001 2002 2003
US Average(1970 - 2000)
Estimated(2001 - 2003)
Out of Pocket Costs as a Percent of Total Health Expenditures
182002 National Survey of Employer-Sponsored Health Plans
Co-payments popular -- but not the answer to cost management...
Primary Care Specialty Care
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$75.00
$91.25
$0
2002 2007
$15 Copay
$100
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$15 Copay
$52.00
$63.25
2002 2007
Routine Office Visits: Established Patients
192002 National Survey of Employer-Sponsored Health Plans
Perceptions about managed care have changed…
Source: Harris Interactive
202002 National Survey of Employer-Sponsored Health Plans
0%
10%
20%
30%
40%
50%
Determinants of Health
Determinants 10% 20% 20% 50%
Access to Care
Genetics Environment Behavior
Demand – What drives health care resource consumption?
Source: IFTF, Centers for Disease Control and Prevention
212002 National Survey of Employer-Sponsored Health Plans
Is the PPO the plan model for the future?
Employers not happy with 15% trend numbers
Physician leverage is network participation; plays havoc with members
Current plan designs not inflation proof
What are employers doing? changing to plan designs that require “skin in the game”
promoting tools to support consumerism
using their own data to identify focus areas for initiatives
implementing a health advocate for those with chronic conditions
supporting programs to promote good health