HMOs Are Losing Ground To Non-Gatekeeper Plan Models

By Christine Woolsey

Membership in health maintenance organizations is slowly eroding as more people choose to enroll in managed care plans that offer more flexibility in choosing physicians.

Preferred provider plans now have more market share than HMO or point-of-service plans, which allow enrollees to seek care outside the network but pay less for it. The trend has been reported in separate research from A.M. Best Co., the American Association of Health Plans and benefit consulting firm William M. Mercer Inc.

The trend away from pure gatekeeper models may be due in part to consumer backlash against managed care -- and the fact that many people see HMOs as the most restrictive type of health plan model.

According to A. M. Best, the market share of these models dropped 1% to 47% in 1998, and preliminary enrollment reports suggest a continuation of this trend for 1999 and beyond.

Research from consulting firms also shows a decline in HMO enrollment rates.

"For the second year in a row, gatekeeper models are flat or receding but the PPO model is growing -- at least among large employers with 500 or more employees," said Scott Wayne, healthcare practice leader in the Chicago office of William M. Mercer.

"Part of this is due to managed care backlash, but it's also happening because of costs," he said. "Our research shows pretty clearly that POS plans are maybe a percent or two better in price, but most employers are asking, 'Is a percentage or two worth it given the gatekeeper hassles and complaints?'"

Improvements in PPO programs and network design also are driving membership increases in those plans. "Utilization review and disease management programs are better and network contacts have been shored up," Wayne said. "PPOs don't offer a gatekeeper, but they are not just pure discounts anymore."

Mercer's latest data shows that in 1998, PPO membership grew to 40%, up from 35% in 1997. During that same time period, POS plan membership declined to 18% from 20% and HMO membership shrunk to 29% from 30%. That's a relatively small change, "but it's definitely a trend," Wayne said.

A spokesman from the American Association of Health Plans, a Washington, DC-based trade group that represents managed care plans, agreed that membership in HMOs is declining as people move into more flexible health plan models. "It's all about consumer choice," he said.

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