Date: July 6, 2004
For more information contact: Eileen Mallow, Assistant Deputy Commissioner, (608) 266-7843 or eileen.mallow@wisconsin.gov

PPO Health Plans Confuse Many Consumers

Madison, WI--Complaints received by the Office of the Commissioner of Insurance (OCI) indicate that many consumers learn about the limitations and restrictions surrounding preferred provider organization (PPO) health plans only when they are surprised to find themselves responsible for a large portion of their medical bills.

Evolving from the traditional fee-for-service and HMO plans, PPO plans are products offered by insurers that are commonly marketed as an in-between option designed to satisfy consumer demands for lower cost health insurance options and greater choice in access to health care providers. However, many consumers are discovering that choice in a PPO plan is not without cost. The extra flexibility in a PPO plan is often paid in the form of co-pays, increased deductibles and charges for out-of-network add-ons.

"On the surface, PPOs sound pretty straightforward," said Jorge Gomez, Commissioner of Insurance. "By using in-network providers you pay a lower amount of the cost for the health care service than when you use an out-of-network provider. But where many consumers get tripped up is when they don't have the necessary information to determine the cost to them of care before it is performed. Specifically, consumers may have difficulty in determining which providers qualify as in-network providers."

Like HMO plans, PPOs have a network of health care providers with whom they contract. The PPO then pays providers at a pre-negotiated rate each time they treat an enrollee, and the enrollee is billed for a percentage of that cost. However, unlike a HMO, PPOs pay some of the cost for out-of-network care.

The PPO's payment is based on the in-network cost for the procedure. For example, if the procedure costs $1,000 within the network, and the out-of-network provider charges $1,500, the PPO bases its payment on the $1,000 in-network cost. Therefore, with a 60/40 co-pay structure, the PPO insurer pays 60 percent of $1,000, leaving the enrollee to pay for the remaining $400 of the in-network cost plus the additional $500 that the out-of-network provider charges above the PPO's pre-determined rate. For more expensive procedures, the enrollee can be left with an even larger portion of the bill if there is great disparity between the PPO's rate and the out-of-network's charge. In addition, charges paid directly by the consumer may not count towards the annual out-of-pocket maximum.

"There are many things you need to consider if you are using a PPO because it is easy to find yourself responsible for medical costs you wrongly assumed were in-network and covered," said Gomez. "Consumers using a PPO plan who don't want to spend additional money need to do their homework. For example, if your doctor is in-network but his office has blood work processed at an out-of-network lab, you have to consider how that will affect your bill."

"I strongly encourage PPO enrollees to contact their insurer before they undergo significant medical treatment to determine the in-network versus out-of-network status and to be knowledgeable of the significant difference in cost to the enrollee for out-of-network health care. It is important to keep a record of the contact you make with an insurer, recording who you talked to and the details of the discussion so you are prepared later if any issues arise."

OCI complaints indicate that PPO enrollees can encounter service limitations because PPOs may not have providers in all geographic areas. For example, an in-network specialist may only be available in the Milwaukee area and not in the enrollee's Waupaca location. Likewise, PPO enrollees may also not be able to find an available in-network doctor if they need care while traveling. Even if emergency medical treatment is needed, most PPO plans will pay the physician, emergency room and hospital services at the same out-of-network rates as they would any other non-network visit.

Consumers given the choice between health insurance plans--whether they are HMO, PPO or other plan types--should sit down with a representative of the insurance company to discuss their medical needs and financial situation before making a decision.

"It is tremendously important that consumers understand what they are buying, and that can be challenging," said Gomez. "I encourage consumers who have had trouble with a PPO to contact our office and file a complaint."

Complaint forms may be downloaded from http://oci.wi.gov. For more information about PPO plans and other managed care health plans, consumers can contact OCI Information and Complaints by calling 1-800-236-8517, e-mailing ociinformation@wisconsin.gov, or writing P.O. Box 7873, Madison, WI 53707-7873. OCI offers over 30 consumer guides to insurance including the Consumer's Guide to Managed Care Health Plans in Wisconsin. A free copy of any OCI publication is available upon request.

Created by the legislature in 1871, Wisconsin's Office of the Commissioner of Insurance (OCI) was vested with broad powers to ensure that the insurance industry responsibly and adequately met the insurance needs of Wisconsin citizens. Today, OCI's mission is to lead the way in informing and protecting the public and responding to its insurance needs.