Exclusive Provider Benefit Plans – New for Some, But Not For All
By Monica L. Piñon, Texas Department of Insurance, Austin, TX
In May of 2011, the Texas Legislature passed a bill allowing for the establishment of commercial exclusive provider benefit plans1 (“EPOs”) as another type of preferred provider benefit plan (here, referred to as a “PPO”) that can be offered to insureds.2 Similar to a traditional PPO, an EPO consists of a network that carriers can use for the delivery of benefits to insureds. However, what distinguishes an EPO from a traditional PPO is its limitation on providing benefits only for services obtained within the network,3 and providing no benefits for services voluntarily obtained outside of the EPO network.
Legislative History & Background
The main impetus behind the passage of the bill was the desire to provide an additional option for providing lower cost health plans to employers and individual consumers.4 The Texas legislature recognized the similarity of an EPO’s structure to that of an HMO – with benefits limited to the defined network – and worked to create protections in the bill for consumers by requiring the extension of benefits for emergency care and in the event of an inadequate network. Like HMOs, EPOs will also be more heavily regulated regarding quality of care than PPOs and they will be examined by the Texas Department of Insurance on a regular basis. Several stakeholders supported the bill, including trade associations and insurers. No person or entity registered in opposition of the measure.5 The bill allows for the regulation of EPOs in the same manner as traditional PPOs and, in response, the Texas Department of Insurance has drafted rules for the regulation of EPOs to address network adequacy and certification, as well as required disclosures. EPO rules have not yet been published for formal comment and adoption. A draft version of the rules has been publicly proposed for informal comment.6 Following their proposal, some stakeholders noted the similarities of the informal draft rules to existing rules regulating HMOs and requested a scaled-back version limited to requirements expressly enumerated in the legislation.7
Utilization of EPOs in today’s insurance market could help address issues that are pertinent to the cost discussion, but may not be obvious from the surface. By limiting benefits to a defined network of providers and providing no out-of-network benefits, EPOs could eliminate many potential disagreements among providers, carriers, and insureds about balance billing and out-of-network reimbursement issues. Eliminating out-of-network benefits as an option for insureds may provide an opportunity for carriers and providers to renew discussions for inclusion within a network. Carriers will need to be mindful of properly educating potential insureds about the limitations and benefits an EPO can offer in order to manage expectations for providers and insureds alike, and for providing notice to insureds and potential insureds as required by the new law.8 Providers in Texas will also need to be aware of this new type of coverage, and even though many are accustomed to being paid for out-of-network services by PPO plans, some providers may only be able to seek payment from an EPO insured instead. Carriers will likely need to address these new limitations of a provider’s ability to make out-of-network referrals in order to avoid unwelcome surprises.
Some may argue that EPOs are simply another type of limited network for which rules were written in 2002.9 Designed to provide lower premium rates to insureds, limited networks function by providing benefits to enrollees but in a smaller service area, as a subnetwork of an HMO.10 EPOs do not necessarily face the same geographical limitations as a limited network, but will be expected to meet adequacy requirements for their networks, just as limited networks are required to meet the same accessibility and availability requirements of non-limited network HMOs. Unfortunately, limited networks did not gain much traction in Texas and are not widely utilized. EPOs have the potential to be more prominent in the market, especially if the rules that are ultimately adopted can properly balance the needs of consumers and the industry.
EPOs in Other Settings
Although new to Texas, EPOs are not entirely new to the insurance industry. Even though the self-insured market is largely exempt from state insurance regulation, self-insured entities may utilize EPOs in benefit packages to employees.11 In addition, other states have utilized EPOs in their commercial regulatory schemes. For example, in New Jersey the use of EPOs is limited to certain individual plans known as Basic and Essential Health Care Plans.12 Similar to events in Texas, the integration of EPOs into New Jersey law was prompted by a desire to provide additional options to insureds in the individual market, but at a more affordable rate than the options that existed at that time.13 Unlike Texas, however, New Jersey began utilizing EPOs a decade ago. EPOs are not required for the New Jersey individual market, but the ones that are available can utilize existing HMO networks as their own.14
The integration of EPOs in Texas could impact the individual and group markets, but it is too early to know the extent to which they will saturate the insurance market. Nevertheless, it appears likely that after rules are adopted in Texas, carriers that choose to develop EPOs of their own could utilize existing PPO networks to satisfy the state’s requirements. This could result in reduced costs to carriers in establishing EPOs by eliminating the need to procure new contracts with providers for delivering care to insureds. If successful in Texas, a populous state, the concept may expand even further throughout the country.
Regardless of whether in a fully-insured or a self-insured world, the utilization of EPOs could generate the same kind of results: lower costs for all parties involved. What remains of utmost importance, however, is the need to establish a proper foundation before establishing EPOs – not only in the development of the network itself, but also in the education of the people who will be accessing the care and the benefits of the EPO. If EPOs gain a reputation for providing overly limited networks without real cost savings, they might face difficulties. On the other hand, if adhered to closely and used properly, a closed-network EPO could provide real cost savings to insureds while eliminating out-of-network headaches for providers and carriers.
CHIP and Medicaid utilize exclusive provider benefit plans. See 28 Tex. Admin. Code §3.9201, et seq.
|2 ||See HB 1772, 82nd (Reg) Session.|
Exceptions exist. See Tex. Ins. Code §1301.0053.
House Research Organization, Bill Analysis, Tex. H.J. HB 1772, 82nd Leg., R.S. (May 4, 2011) at 46.
For a copy of the stakeholders’ written comments, please contact the author directly.
See Tex. Ins. Code § 1301.1581.
28 Tex. Admin. Code §11.1607.
See Tex. Ins. Code §843.078, et seq.
IBM appears to offer EPOs to its employees: http://www-01.ibm.com/employment/us/benefits/s07a.shtml
N.J. Stat. Ann. §17B:27A-4.5.
See New Jersey P.L. 2001, Chapter 368, Senate No. 13.
N.J. Stat. Ann. §17B:27A-4.5.
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