The triple option choice: self-selection bias in traditional coverage, HMOs, and PPOs

Health care costs and utilization by salaried employees and their dependents at a large self-insured midwestern industrial manufacturing corporation were analyzed for the year before employees were first offered a triple option choice. Members had the option of retaining traditional Blue Cross and Blue Shield of Michigan (BCBSM) coverage or switching to either a number of health maintenance organizations (HMOs) or a number of preferred provider organizations (PPOs). Members who switched to HMOs or PPOs were generally younger and had lower average expenses and utilization rates than those who retained the traditional BCBSM plan. The results suggest that a selection bias does occur in this population, as lower cost members were more attracted to the HMOs and PPOs than were more expensive members. Implications for the corporation as well as for the drive toward managed care alternatives are discussed.