Marketplace Pulse: Preferred Provider Organizations Remain Rare in the Individual Market

The Marketplace Pulse series provides expert insights on timely policy topics related to the health insurance marketplaces. The series, authored by RWJF Senior Policy Adviser Katherine Hempstead, analyzes changes in the individual market; shifting carrier trends; nationwide insurance data; and more to help states, researchers, and policymakers better understand the pulse of the marketplace.

Adequate provider access is a fundamental aspect of health insurance, but many coverage markets fall short in delivering on this feature. The size of networks and the accuracy of provider directories have been frequently found lacking in assessments of Medicare Advantage, Medicaid, and the individual and small group markets. Every "secret shopper" study has the same basic finding—consumers struggle to find providers and make appointments within reasonable intervals.

Having coverage that provides access to out of network benefits, such as a PPO plan (Preferred Provider Organization), is a valuable resource for consumers coming up against limitations in their provider network. This can be useful in cases where a member might need a highly specialized treatment and there are relatively few clinicians that can provide it, or more generally, when a narrow provider network has a limited supply of a particular specialty, such as behavioral health. Additionally, access to out-of-network care can be very important in cancer care where certain treatments or procedures may only be provided in a small number of locations nationally. Challenges for patients with breast cancer in accessing breast flap reconstruction provides an important example of the importance of out-of-network coverage, and patient narratives document the difficulty in obtaining coverage in-network. The level of out-of-network coverage may not be particularly generous, but the existence of out-of-network benefits provides consumers with an important option.

In the individual market, PPO plans have historically been relatively rare. In the early years of the market there was a shift in the dominant plan type, and many insurers eliminated PPOs altogether and replaced them with HMOs or EPOs, which essentially have "closed" (and generally quite narrow) networks with no out-of-network benefits. This has been seen as a necessary tradeoff required to keep plans competitively priced and account for the initial difficulty in recruiting providers. The relative scarcity of PPO plans has been a feature that differentiated the individual market from the employer market, where PPOs are far more common. 

Yet, in recent years, there have been a number of trends which would theoretically be conducive to an increase in the prevalence of PPO plans. Most importantly, individual market enrollment has grown significantly, largely because of expanded premium tax credits, but also due to demographic and labor market shifts that have increased the size of the population that does not receive an affordable offer of coverage from an employer. As the size of the marketplace has grown, so has physician participation in marketplace plans.

The individual market is also being increasingly used by small employers. In particular, there has been a growing interest (though generally low volume thus far) in the use of ICHRAs, a Health Reimbursement Arrangement through which large or small employers can partially subsidize the cost of employee premiums in the individual market. The attractiveness of this option depends in part on the relative affordability of the individual compared to the small group market but also on the acceptability of the coverage to employees, suggesting that ICHRA growth could fuel an increase in the prevalence of PPO plans. There is also an aspect of the current ICHRA policy that creates a financial incentive to enroll in off-exchange plans in some circumstances, which could potentially increase the prevalence of PPOs in that segment in particular.

Despite these trends, data suggests that there is no surge in PPO availability in the individual market. As seen in Figure 1, for marketplace plans, there is little change, and only 14% of 2025 plans are PPOs. There is a modest increase in the prevalence of PPOs among off-exchange plans, from 19% in 2023 to 23% in 2025. In the small group market (Figure 2), there is very little change over time, but the levels are much higher, and approximately 40% of plans are PPOs in 2025. Overall, little has changed in the marketplace, and while there are some signs of PPO growth in the off-exchange market, there remains a large difference between the individual and the small group market.

The national prevalence of PPO plans masks a significant amount of geographic variation because there are many states in which no PPO plans are available. PPO plans are most reliably present in rural states with relatively small populations, suggesting that the overall share of Marketplace enrollees with access to a PPO plan is relatively low. Figure 3 shows the pattern of PPO availability by state. Many large states, such as New York and Texas, don't have any on-market PPOs, and in many other large states, including Florida and Georgia, there are very few PPOs. Thirty-seven percent of U.S. residents live in a state where there are no PPO plans in the marketplace. Thirty-three percent of residents live in a state where fewer than 20% of marketplace plans are PPO. The remaining 30% of the population lives in a state where at least 20% of marketplace plans are PPOs. Importantly, in states where there are at least some PPO plans, we cannot assume that these plans are available statewide, so these statistics overestimate access to PPOs. Figures 4-6 provide further detail for individual states for the marketplace, the off-exchange, and the small group market.

Lack of access to PPO plans is disadvantageous to marketplace enrollees who may want to seek specialized treatment that is potentially out-of-network, yet the benefits of PPO plans should not be overstated. Overall, provider networks in marketplace PPOs are not dramatically wider than in HMOs. An analysis of provider network data from Ideon by KFF shows that the average PPO enrollee had access to 53% of area physicians in their network, as compared to 37% and 38% for HMO and EPO enrollees, respectively. And this comparison overstates the impact of plan type. PPOs are more likely to be in rural areas where there are fewer providers, so while rural provider networks are “broader” in that a higher share of providers are participating, it doesn’t necessarily mean that there is a lot of choice.

Furthermore, the actual extent of out-of-network coverage in a marketplace PPO is, in many cases, quite meager, as some plans offer relatively little in the way of either cost-sharing or financial protection. Examples of these relatively skimpy provisions include plans that offer no out-of-pocket maximum for out-of-network care and require enrollees to pay 75% co-insurance on out-of-network charges. Plans may also only agree to pay their portion of coinsurance as a share of a rate that they consider to be reasonable, leaving patients, in some cases, with a balance bill when out-of-network providers charge a higher rate.

PPOs were created in response to the “HMO backlash” of the 1990s, much of which was driven by consumer anger at primary care doctors serving as gatekeepers to specialty care. PPOs were seen as improvements over HMOs since referrals from primary care providers were no longer required, and because they provide at least some coverage for care outside of the provider network. A PPO plan is considered to be a marker of more “generous” coverage and a key differentiator between employer coverage and the individual market. PPOs are the most common form of coverage in the employer market, with nearly half (47%) of covered workers enrolled in a PPO in 2023. They are also common in Medicare Advantage, where approximately 43% of enrollees are in PPOs.

Yet despite large enrollment growth, increased provider participation, and a notable uptick in enrollment from small businesses, so far there has not been corresponding growth in the prevalence of PPO plans in the individual market. The PPO plans that do exist do not necessarily offer much in terms of out-of-network coverage. It remains to be seen whether continued influx from the group market will spur an increase in the supply and quality of PPOs in the marketplace, whether the PPO designation will lose its cachet, or whether ICHRA adoption will stall out over a perceived gap in plan quality.

*Plan data are from Ideon/HIX Compare