CBC Health News

Evaluating PPO Networks:  

May 25, 2022

A group of executives in a meeting comparing health benefit costs.


Evaluating Preferred Provider Organization (PPO) Networks: A Key Driver in Health Plan Costs

Medical claim costs typically make up more than 70% of the cost of private health insurance. Fixed costs such as stop loss premium, administrative expenses and access fees comprise the remainder of plan costs. Negotiated fee amounts between participating providers and Preferred Provider Organization (PPO) networks determine the specific amounts that are reimbursed to health plans, and since medical cost trends have increased on average more than 6% over the last five years (https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html), it is vitally important to choose the right PPO network partner. 


The process of evaluating PPO networks can assist with helping to understand future plan costs.


A line of doctors and nurses representing your choices of healthcare providers


Two ways to evaluate a PPO network:

  1. Repricing Analysis – Medical claims repricing helps compare medical claims costs across different health plans/networks on the same basis. It gives a clear view of the options. The primary benefit of the repricing exercise is to provide an objective and actuarially sound analysis of a claims cost comparison among different networks by reviewing historical claims costs. 
  2. Access and Disruption Analysis – Conducting an analysis on the availability of participating providers and healthcare professionals helps to inform how well a network will meet the needs and preferences of its clients. To ensure that a provider network meets the availability needs of a plan, it should be evaluated based on several criteria:

  • Geographic distribution – participating providers are within reasonable proximity to plan members
  • Number of Providers – an adequate number of participating providers are available
  • Cultural, racial, ethnic, and linguistic needs and preferences of providers meet the needs of plan members


Emerging trends as alternatives and network supplements:


  • Reference Based Pricing - Under reference-based pricing, the employer (supported by a third-party administrator [TPA] or other vendor) pays a set a price for each health care service instead of negotiating prices with providers. Plan participants are free to see any provider that they choose without the limitations of a traditional PPO Network. The most successful RBP based plans will ensure that the plan provides full reimbursement for all services with no balance bill to members. 
  • Virtual Direct Primary Care - Virtual primary care is a form of primary care that leverages technology to give patients convenient face time with their primary care provider(s). Leveraging technology, and with plan design driven incentives, this type of model can drive down plan costs and enhance member access at the same time for many types of visits.
  • Remote Patient Monitoring - Remote Patient Monitoring drives improved patient outcomes and engagement with easy-to-use software. These are high quality pre-paired devices that are shipped directly to patients or hand-delivered to the employer. Helps clinicians understand what’s occurring with their patients on a daily basis,as it happens.
  • Leveraging Artificial Intelligence (AI)   - AI provides enhanced and proactive management of healthcare data, claims and risks, as well as network and administrative processes. AI can leverage machine learning to enable advanced, timely and dynamic data analysis of health insurer data and electronic health records. AI produces deep insights into the medical cost of claims and employ these outcomes for networks, claims, pricing, and risk management.


Blog Tags:

PPO, Provider network, Health Plan, Health Plan Costs, CBC




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