Remember the Sony Walkman, disposable cameras and the compact disk? Are you still relying on health insurance strategies that had their hey-day in the 80’s? Preferred Provider Organizations (PPO’s) are the heart of many group health insurance plans. They are also one of the reasons for over inflated prices today. In the 80’s an insurance carrier could approach a hospital system or other health service provider and offer them access to their thousands of customers if they would offer a discount. Times have changed. Instead of dozens of insurance carriers, there are now about a half dozen. Here is the biggest difference today: every hospital system is in every PPO network and as a result every hospital network is in every insurance plan. There is no leverage. The prices you see are not real. The prices and the discounts you see are structured to give you the perception of value. Plus the consolidation of hospital systems gives hospitals power to manipulate PPO pricing. A study done by Cory Capps, an economist at Northwestern University found the following: “Most consolidations among competing hospitals lead to higher, not lower, prices.”
So what can you do with your group health insurance plan? Forget the PPO concept of discounts. There are strategies that will allow employers to replace the PPO discount concept and replace it with a real-world pricing system. For more on pricing models that could save as much as 30% in premiums, contact me through LinkedIn at www.linkedin.com/in/vanrichards/ or visit our website at www.abs-insurance.com
 Capps, Cory. “Hospital Consolidation And Negotiated PPO Prices.” HealthAffairs. 23.2 (2004): 175-181. Web. 30 Oct. 2013. <http://content.healthaffairs.org/content/23/2/175.full>.