HMOs in Unstable Condition: Members Bolt to Other Plans
HMOs, once the top choice for Americans who get healthcare as a job perk, are so last century.
Tightly controlled health maintenance organizations have steadily lost ground over the last decade to preferred provider organizations, which offer greater choice of physicians and hospitals and direct access to specialists -- though at a higher price.
HMOs garnered only 25% of the employer-based health benefits market last year, down from a high of 31% in 1996, according to a recent survey by the Kaiser Family Foundation, a Menlo Park, Calif.-based think tank. During the same period, PPOs nearly doubled their market share to 55%.
HMO enrollment in Blue Cross and Blue Shield plans, which cover more than 90 million Americans, has declined steadily since 2001, while the Blues' PPO enrollment has surged. Cypress-based PacifiCare Health Systems Inc., which sells both types of plans, said all of its recent growth was from PPOs.
Even in California -- where HMOs got their start and remain the most dominant health plan -- enrollment has slipped. During the recent economic downturn, HMOs lost 1.4 million members, according to the state Department of Managed Healthcare. Oakland-based Kaiser Permanente, the nation's largest nonprofit HMO, has struggled to keep its membership steady.
"HMOs have lost their edge," said Sally Pipes, president of the Pacific Research Institute, a San Francisco-based think tank. "Patients were just furious with having to go through gatekeepers to get care from a specialist, so there was this
Initially, HMOs gained popularity with employers and workers because they held expenses down by requiring patients to go through primary care physicians before being referred to specialists. But as HMOs mushroomed during the late 1990s, they became lightening rods for complaints about overly restrictive healthcare.
More recently, benefits experts say, the move away from HMOs has been propelled by large employers because it's easier to shift rising healthcare costs to workers enrolled in PPOs. Such plans traditionally have had more flexible benefit designs and more pricing mechanisms to tinker with, including deductibles. And now, HMOs are playing catch-up.
"What's happening to HMOs is really at the heart of a repositioning in the healthcare industry," said Maureen Sullivan, vice president in charge of strategy at the Blue Cross Blue Shield Assn.
