PacifiCare HealthSystems, one of the nation's largest health maintenance organizations, said Tuesday it has begun offering a new health plan option in a bid to attract more large corporate customers.
The new preferred provider organization, or PPO, to be offered in more than 40 states is designed to appeal to companies with offices in several states. It is also another managed care option for companies that want to do business with one insurer offering more than one type of health plan, PacifiCare said.
PPOs are popular with many employees because they offer more freedom of choice for patients to select doctors or hospitals. HMOs typically have not allowed members to seek medical care outside their doctor and hospital network. Under both types of plans, doctors and hospitals agree to discount their fees in exchange for access to patients.
Increasingly, HMOs are recognizing the need to provide a broader range of health care choices for customers. Earlier this year, HMO giant Kaiser Permanente, in a sharp break from tradition, announced an alliance with Pacific Mutual Life Insurance Co. that will allow some Kaiser patients in California the option of seeing non-Kaiser physicians.
HMOs are also feeling competitive pressure from large traditional insurers, such as Aetna or Metropolitan Life, which are moving aggressively into the managed health care field.
"The major carriers can say to employers, 'No matter what you want, we have it,' and they can migrate employees from one health plan to another," said Peter Boland, a health care consultant in Berkeley. "It makes the HMOs vulnerable; if you don't want an HMO, you don't want PacifiCare."
William L. Young, a PacifiCare senior vice president, said the company's customers are demanding more choice of health plans and a broader geographic reach.
He noted that the move significantly expands PacifiCare's operations from the current six states--California, Florida, Oklahoma, Oregon, Texas and Washington--to 46 states. "Now when we have clients in those six states who say, 'Can you service our employees in Fargo, N.D.?', we can say yes," he said.
Rather than set up its own medical network from scratch, PacifiCare said it will contract with Affordable Medical Networks, a unit of Chicago-based Health Care Compare Corp. Affordable Medical operates a PPO network that includes 125,000 health care professionals and nearly 1,700 hospitals in 46 states, PacifiCare said.
The new program could help fuel PacifiCare's ambitions to expand nationally by establishing name recognition in dozens of states where the company doesn't operate currently. And as employers increasingly encourage more workers to choose cost-efficient HMOs, PacifiCare would anticipate that many members who initially joined the firm's PPO health plans would switch to an HMO, Young said.
That conversion could be important to PacifiCare's ambitions to expand its important Medicare HMO program, called Secure Horizons, into additional states. Because of federal guidelines, however, PacifiCare would first be required to establish a strong base of commercial HMO membership before it could sign up patients for its Medicare program.