The Real Impact of PPOs on American Families
One of the local news channels where I live in Nashville has an ongoing series about American families struggling with medical debt. One in four Tennesseans is burdened with medical debt, and the stories are both heartbreaking and seemingly endless. A wife taking a second job cleaning houses to pay for her dying husband’s chemotherapy. A young single mother watching the bills pile up for her baby’s emergency delivery. A 60-year-old man postponing retirement by driving for Uber to pay more than $50,000 in bills for a life-saving vascular surgery.
For so many of these stories, the amazing thing is that these individuals already had insurance. They were being penalized even though they had played the game by the rules. According to a new Kaiser/New York Times study, one in five working-age Americans with health insurance reports problems paying their medical bills. Faced with a major bill, 63% report that they used up most or all of their savings and 42% took on an extra job or worked more hours. Many also find themselves increasing their credit card debt, borrowing money from family or friends, changing their living situation and seeking charity aid.
It’s no wonder that 66% of bankruptcies in America today are related to medical costs. That’s more than 500,000 families impacted each year, even as healthcare and insurance costs continue to rise.
Today’s healthcare insurance crisis is driven by a multitude of factors, but the failure of the BUCA (Blue Cross Blue Shield, Aetna, UnitedHealthcare and Cigna) insurance carriers and their Preferred Provider Organizations (PPOs) to protect Americans is undeniable. In fact, employees with BUCA PPOs pay the highest deductibles and premium costs in the U.S, according to a recent study. And 1 in 5 employees on PPO plans reports having a balance bill they weren’t expecting.
Almost 70% of employer self-funded plans are traditional BUCA PPOs. You might think that this high level of adoption would give these plans enough leverage to drive down costs. That’s not the case. Despite their wide usage, PPOs offer a number of challenges:
According to a recent independent study on hospital prices by RAND Health, “Employers generally lack useful information about the prices they are paying and many contracts between large provider systems and insurers actually prohibit sharing detailed pricing information with employers and patients.” Employers with a PPO are essentially buying their healthcare — likely their second- or third-biggest business expense — blind to cost and quality, within a plan arrangement that leaves their employees highly vulnerable to surprise balanced billing and exorbitant charges.
That’s why employers with PPOs (even PPOs within a self-funded plan) should ask themselves what their plan is actually purchasing. Yes, there’s a long-held belief that employees want a wide network, but at what price? If your wide network is costing you millions and your employees thousands, is that access worth it?
Not surprisingly, many employers nationwide are shifting the way they think about healthcare insurance and moving to alternate solutions. If you’re an employer or broker who wants to optimize plan performance, you should consider:
Today, employers spend a significant amount of money to insure employees — let’s not leave them exposed and force them to take a second job, postpone retirement or declare bankruptcy because of a medical emergency. Cost-saving innovations, like direct contracting, can help you drive down spend and provide tools that protect your employees against the burdens of today’s healthcare costs. With these new solutions in place, you can finally take back control of healthcare — and take care of employees in the process.