Insurers' Competitive Strategy and Enrollment in Newly Offered Preferred Provider Organizations (PPOs)

While early growth in preferred provider organizations (PPOs) coincided with growth of managed care generally, recent expansion has come primarily at the expense of other managed care plans. Little is known about the micro behavior underlying these trends. In 2005, University of Michigan employees were offered PPOs for the first time by vendors who also offered other plans. PPOs helped the offering vendors maintain or increase their total enrollment share. PPOs were most attractive to workers who previously had chosen less managed plans. Because PPOs drew few enrollees from health maintenance organizations (HMOs), there was little evidence of a backlash against managed care in the context of the University of Michigan employee group.