Customers’ favorite plan dropped by Tufts Health

Less than a year after Tufts Health Plan entered the Rhode Island
marketplace, the regional managed-care company is yanking its most
popular, but least profitable, product here: the preferred provider
organization, or PPO.

The plan, which gives members the most flexibility in choosing a health
care provider, “is from a pricing standpoint artificially low,” said
Beth Honan, the company’s Rhode Island director. That became a problem
when the state’s many small businesses embraced the indemnity-style plan
and all but ignored two of the more traditional managed-care options,
the health maintenance organization (HMO) and point-of-service (POS)
plan, she said.

Of Tufts’ 6,900 members living and employed in Rhode Island, almost 70
percent, or 4,900, are enrolled in the PPO, Honan said. By comparison,
that number in Massachusetts, New Hampshire and Maine combined is about
5 percent, said Michelle Davis, public relations director for Tufts
Health Plan, Inc. in Waltham, Mass.

In states where the HMO and POS plan are its biggest sellers, Tufts has
been able to “coordinate care so we’re better able to control medical
costs,” Honan said. That hasn’t been the case in Rhode Island where the
newcomer can claim less than 1 percent of a market dominated by Blue
Cross & Blue Shield of Rhode Island, Harvard Pilgrim Health Care and
United Health Care of New England; and where it, like other plans, is
operating at a loss, she said.

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For the nine months ending Sept. 30, Tufts New England suffered a $26.7
million loss, largely caused by investments in operations in Rhode
Island, New Hampshire and Maine, where the health plan remains
relatively new, Davis said.

Tufts will service its existing 1,000 PPO accounts in Rhode Island until
they expire. After that, subscribers can enroll in the HMO or POS, or
choose a different insurer, Honan said.

Subscribers to Tufts’ HMO pay a flat fee in exchange for care by
physicians and facilities under contract with Tufts. Members choose a
primary care physician through which visits to specialists and other
health-care services must be authorized, with a few exceptions.

Tufts’ POS members have the option of circumventing the referral process
at the cost of higher co-payments and a deductible.
PPO members are not required to have a primary care doctor — a benefit
reflected in premiums about 15 percent higher than the HMO or POS plan,
Honan said. Still the higher cost to consumers hasn’t compensated for
diminishing returns, she said.

The phasing out of the PPO in Rhode Island “was really a long-term
decision” based on “product and pricing dynamics” unique to this market,
Honan said. When Tufts entered the local market in April 1997, it
expected employers to see the value in less expensive, managed-care
style plans. The market dictated otherwise.

Discontinuing the PPO in Rhode Island should allow Tufts to recoup its
losses and focus on its strengths, Honan said. “Really what our company
does best is managed care. We firmly believe in a primary care
physician,” she said.

The company that began as an HMO in 1981 added a POS option in 1986. It
added a PPO in 1995 “because we thought there was a niche for a high-
quality PPO plan and to give our customers one-stop shopping,” Davis
said. However, “it’s not what we would say is our core business.”

Instead, Tufts is recognized as a top HMO. U.S. News & World Report this
year ranked the company third among 271 regional HMOs evaluated for
prevention, access to care, member satisfaction and physicians’
credentials, among other criteria. Fallon Community Health Plan of
Massachusetts and Finger Lakes-Blue Choice of New York were first and

Paul B. Ginsburg, president of the Center for Studying Health System
Change, a Washington think tank, was at first surprised to hear of
Tufts’ decision to pull its PPO here, saying it is not the industry

“Nationally, this is not what’s being seen,” Ginsburg said through a

Tufts’ change of heart may go back to its roots, Ginsburg said, echoing

“They may be trying to shepherd their customers into a POS plan.”

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