Selection in a preferred provider organization enrollment.

OBJECTIVE

The study was conducted to determine whether favorable or adverse selection occurred in a preferred provider organization (PPO) enrollment.

DATA SOURCES AND STUDY SETTING

Secondary data sources were used to conduct a retrospective study of the utilization of health services and the demographic characteristics of the population involved in the first open enrollment in a new university-based PPO. The PPO under study, sponsored by the University of Michigan (UM) Medical Center, was offered to all 43,005 UM employees, dependents, and retirees.

STUDY DESIGN

We analyzed insurance company payments during the one-year period prior to the enrollment to compare the utilization patterns of those who enrolled in the PPO with those who did not.

DATA COLLECTION

Prior health care utilization data were obtained from Blue Cross-Blue Shield of Michigan on the entire university population for one year prior to the start of the PPO. Demographic data were obtained from the personnel office of the university.

PRINCIPAL FINDINGS

The PPO group had a younger median age than the non-PPO group; the sex distribution was roughly similar for the two groups. In the PPO group 57 percent of all contracts were family contracts compared with only 30 percent in the non-PPO group. The PPO group experienced 20.6 percent lower inpatient payments per member, and 9.4 percent lower outpatient payments per member in the year prior to the enrollment. These differences resulted in an overall 18.7 percent lower payment per member for the PPO group in the year prior to their enrollment.

CONCLUSIONS

The results show, based on prior insurance payments, that this PPO received favorable selection during the open enrollment, a finding consistent with favorable selection found in early HMO enrollment.