PPO Enrollment Growth Contributes to Rise in Medical Bad Debt

More state and local government plans are shifting to self-insured alternatives, contributing to a decline in HMO health insurance plan enrollment and rising self-pay medical debt.

According to HealthLeaders-Interstudy, HMO enrollment across commercial managed care continued to decline, tumbling 5.8 percent to 44.3 million between July 2007 and January 2008. At the same time, enrollment in preferred provider organization health plans grew 4.4 percent to 109.7 million, HealthLeaders said.

“There are a number of factors that are driving PPO growth, and cost is one of them,” Jane DuBose, HealthLeaders-InterStudy’s Director of Health Plan Analysis, said in a press release. “PPO products have become less costly for consumers relative to HMOs, yet maintain broad access to providers, which is attractive to members. Additionally, state and local government purchasers of health insurance have increasingly shifted to self-insured options, which in most instances have been built on PPO platforms.”

HealthLeaders-InterStudy analysts said the growth of PPO plans also is a result of consolidation among provider-owned HMO plans.

Consequently, the trend is contributing to the growth in self-pay medical debt balances that have become the fastest rising segment of the hospital’s bad debt expense because PPO health insurance owners tend to have higher deductibles and co-pay requirements.

HealthLeaders said Aetna is one example of health plans demonstrating significant PPO growth trends. Although Aetna’s self-insured line of business saw a majority of Aetna’s enrollment growth through the end of 2007, its fully-insured PPO enrollment grew 9.8 percent, while its HMO enrollment fell 3.4 percent.