Magazine article Risk Management

Get the Most from Your PPO

Magazine article Risk Management

Get the Most from Your PPO

Article excerpt

If there is one prediction health care analysts and consultants are confident making for 2001, it is this: expect to pay more for health care benefits programs. In some regions of the country, premiums are expected to increase 20 percent to 30 percent.

With this increase, HMO pricing is creeping closer to that of more traditional plans, such as Preferred Provider Organizations (PPOs). With costs equalizing, a growing number of employers have moved to PPOs. In fact, after years of double-digit HMO growth, PPOs outpaced their managed care counterparts in 1999. According to the American Association of Health Plans, there are now eighty-nine million people participating in PPOs compared to eighty-one million in HMOs.

As the benefits of PPO plans--freedom, flexibility and accountability--attract more takers, employers are looking for strategies to manage the costs of their new benefits programs.

Making PPOs Affordable

The turmoil and uncertainty of the health care industry makes securing discounts from PPOs difficult. There are, however, a number of ways employers, working with their third party administrators (TPAs) and other benefits consultants, can undertake to ensure they secure the maximum value from a PPO plan design.

* Negotiate hospital rates based on a per diem (fixed rate per day) basis without outliers. An outlier is the excess amount a hospital stay costs over the average expense. Some hospital contracts will revert to a percent-off retail once the total bill reaches this outlier, a relatively low level. With retail rates set by the hospital, this negates the value of the contract. If your PPO hesitates, push to have rates closely aligned with Medicare reimbursement levels.

* Tie physician contracts to Medicare reimbursement levels. For example, physician reimbursement would be 115 percent of the Medicare allowable.

* Reimburse out-of-network claims at Medicare levels. It is important to provide a flexible PPO network that allows employees to go outside the network when needed. Employees must understand, however, that because doctors are not obligated to accept Medicare rates, they may be responsible for additional costs. …

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