Does Type of Health Insurance Affect Health Care Use and Assessments of Care Among the Privately Insured?

Health Services Research, April, 2000 by James D. Reschovsky, Peter Kemper, Ha Tu

Objective. To inform the debate about managed care by examining how different types of private insurance--indemnity insurance, PPOs, open model HMOs, and closed model HMOs--affect the use of health services and consumer assessments of care.

Data Sources/Data Collection. The 1996-1997 Community Tracking Study Household Survey, a nationally representative telephone survey of households, and the Community Tracking Study Insurance Followback Survey, a supplement to the Household Survey, which asks insurance organizations to match household respondents to specific insurance products. The analysis sample includes 27,257 nonelderly individuals covered by private insurance.

Study Design. Based on insurer reports, individuals are grouped into one of the four insurance product types. Measures of service use include ambulatory visits, preventive care use, hospital use, surgeries, specialist use, and whether there is a usual source of care. Consumer assessments of care include unmet or delayed care needs, satisfaction with health care, ratings of the last physician visit, and trust in physicians. Estimates are adjusted to control for differences in individual characteristics and location.

Principal Findings. As one moves from indemnity insurance to PPOs to open model HMOs to closed model HMOs, use of primary care increases modestly but use of specialists is reduced. Few differences are observed in other areas of service use, such as preventive care, hospital use, and surgeries. The likelihood of having unmet or delayed care does not vary by insurance type, but the reasons that underlie such access problems do vary: enrollees in more managed products are less likely to cite financial barriers to care but are more likely to perceive problems in provider access, convenience, and organizational factors. Consumer assessments of care--including satisfaction with care, ratings of the last physician visit, and trust in physicians--are generally lower under more managed products, particularly closed model HMOs.

Conclusions. The type of insurance that people have--not just whether it is managed care but the type of managed care--affects their use of services and their assessments of the care they receive. Consumers and policymakers should be reminded that managed care encompasses a variety of types of insurance products that have different effects and may require different policy responses.

Key Words. Managed care, utilization, access to care, consumer satisfaction, patient trust

The rapid spread of managed care over the past decade has been credited with slowing the growth of health care costs. At the same time, however, consumer concerns about quality have contributed to a "managed care backlash," which has led to calls for increased regulation of managed care. However, much of the current backlash and associated policy debate fails to distinguish among important variants within managed care and to recognize the possibility that these variants may have different effects on health care. This article provides evidence on the effects of the four major types of insurance on service use and consumer assessments of care.

BACKGROUND

Insurance products can be divided into four main types. Traditional indemnity products typically permit patients to have unrestricted choice of physicians, reimburse providers on a fee-for-service basis, and do not manage care except through utilization review (typically for inpatient care). Preferred Provider Organizations (PPOs) contract with provider networks that are typically paid on a discounted fee-for-service basis and charge patients lower cost sharing when they stay inside the network than when they go outside it. HMOs typically require patients to sign up with a primary care physician (PCP) who serves as a gatekeeper for specialty care, charge low copayments for in-network use, and use additional financial incentives and nonfinancial care management tools such as profiling, utilization management, and guidelines to affect provider behavior. Among HMOs, open model HMOs (POS products) cover out-of-network use but with greater cost sharing, whereas closed model HMOs restrict coverage for care to netwo rk providers. Although this terminology is not used consistently and additional variation exists on other dimensions within each type, the four types of products--indemnity, PPOs, open model HMOs, and closed model HMOs-form a rough continuum from loosely to more heavily managed products and from higher to lower patient cost sharing (Gold, Hurley, Lake, et al. 1995; Wagner 1996). Currently, only 16 percent of privately insured persons are covered by traditional indemnity products, 38 percent are in PPOs, 12 percent are in open model HMOs, and 34 percent are in closed model HMOs, based on the data used in this article.

The public often appears to treat managed care as if it is all the same, failing to recognize its differentiation or to define the types of insurance it encompasses. This is reflected in the policy debate over regulation of managed care plans. Although we use managed care to refer to any product with a network, including PPOs, many associate managed care exclusively with HMOs, and some, who focus on restrictions on access to providers, include only closed model HMOs. These distinctions among types are important for policy if different types of insurance have different effects on health care use and consumer assessments of care, and ultimately on quality of care. We expect such differences due to the fundamental differences in restrictiveness, care management, and cost sharing across the product types. At the same time, it should be recognized that these factors can have opposite effects. For instance, while greater care management can be expected to reduce the use of many health care services, lower cost sha ring, as typically found in more heavily managed plans, has the opposite effect on use.