This Year’s Model: PPOs In 2016 Offer Less Out-Of-Network Coverage

A new marketplace trend shows a reduced scope of coverage in PPOs that are currently offered.

Staff portrait of Katherine Hempstead

Katherine Hempstead, PhD, MA, director and senior program officer, leads RWJF's work on health insurance coverage.

Preferred Provider Organization plans (PPOs) are health insurance products that offer both a relatively “broad” provider network, along with some coverage for use of out-of-network providers. Since last year there has been a significant reduction in the number of PPOs offered in the Affordable Care Act (ACA) marketplaces. A prior analysis showed that of the 131 carriers offering silver PPO products in 2015, only about one-third remained unchanged in 2016, while the rest were either reduced in scope or eliminated.

While much attention has been given to the reduction in PPO availability in the marketplace, an additional trend has been toward a reduced scope of coverage in PPOs that are currently offered. The PPO category is not very specifically defined, and within this category, plans could vary considerably in the extent of coverage for out-of-network providers, the degree of cost sharing required and the breadth of the provider network. Since changes in the generosity of out-of-network coverage don’t affect a plan’s actuarial value (AV), carriers can adjust these features without affecting the AV status. Plans new to the market in 2016 provide less coverage for out-of-network providers as compared to those that are continued from last year. There are major regional differences not only in the availability of PPOs, but also in the availability of PPOs that provide significant financial access to out-of-network providers. While most plans that were on the market in 2015 and have been continued have not changed very much, consumers shopping for marketplace plans should be aware that there is significant variation in important coverage characteristics within the PPO category.