How Does an Employer Decide on Which HMO or PPO Group Insurance Plan?
Employers carefully consider several factors when deciding which HMO or PPO group insurance plans to offer their employees. The primary driver is cost. Employers typically work with their insurance broker to analyze the various plan designs, service areas and costs. Based on these factors, the employer decides the most feasible, accessible and affordable health plan options to offer.
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Premiums
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Generally, premiums for a health maintenance organization, or HMO, are less expensive than a PPO, or preferred provider organization. Employers with a tight budget looking to cut administrative costs may opt to offer an HMO over a PPO. This is true especially if employee feedback includes complaints about the cost of employee benefits. HMOs offer less out-of-pocket costs to participants with a smaller premium, making this attractive to both employers and employees. If cost is less of a concern, or the employer plans to place a larger percentage of the cost sharing contribution on the employee, they may decide to offer a PPO option.
Geography
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A major consideration in choosing a group health plan is the location of employees. HMOs have specific service areas and may or may not be available where your company's employees live. Your company may prefer to offer a PPO with a wider range of in-network providers that allows the ability to use out-of-network providers. Companies often submit a list of their employee's home ZIP codes to prospective health insurers to run a disruption analysis report to determine the availability of their PPO network providers. Decisions may be made based on the outcomes.
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Plan Flexibility
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Employers know that choice and flexibility is often important to their employees. For this reason, some employers offer both an HMO and PPO option. It's important to note that the HMO plans are less flexible in plan design. Participants cannot go out of network and all care must be directed through a "gatekeeper," a primary care physician. PPOs allow the employer greater flexibility to offer, exclude or limit particular benefits or services. It also allows the employee the opportunity to seek care from the provider of their choice, a very attractive option.
Role of the Broker
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An employers' broker consultant often assists in determining which group insurance plans employers will offer. The broker sends requests for proposals to several insurance carriers, along with reports of past claims history, and obtains preliminary quotes, plan designs and network disruption analysis from the carriers. The broker advises the employer, negotiates rates and assists with the group application, contract and enrollment process. Brokers also help with strategic marketing and integration of plans into other benefit programs.
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