Managed-care update: promoting HMOs and PPOs in the Hoosier state.

Managed care has become a hot topic in the Indiana business community in recent months.

The state's business executives have been hearing about health-maintenance organizations, preferred-provider organizations and gatekeepers to control surging health-benefit costs for years. But as managed care attempts to increase its penetration in the Hoosier state, it finds itself fighting legislative and consumer battles in the Indiana General Assembly.

Indiana lags behind the nation and most nearby states in managed-care penetration. Greg Schenkel, executive director of the Indiana Association of Health Maintenance Organizations, says about 800,000 Hoosiers are members of HMOs, the most typical kind of true managed-care plans. That's about 13 percent to 14 percent of the Hoosier population, well below the national HMO penetration rate of 25 percent as well as the 20 percent to 25 percent rates typical in surrounding states. And Indiana managed care has a long way to go to match Oregon and California, where the percentage of residents enrolled in HMOs has hit 39 percent and 37 percent, respectively.

But if managed care is defined to include preferred-provider organizations (PPOs) and discounted fee-for-service health plans, as many as eight out of every 10 Hoosiers have access to some kind of managed-care plan.

A PPO network differs from HMOs and fee-for-service plans in several important respects. For one thing, it does not actually assume the risk of insuring members. For another, it offers customers a much wider range of physicians than the typical HMO can.

"There's just not the same national pressures here," Schenkel says, explaining the relatively low HMO penetration rate in Indiana. "There's no crisis situation with health-care costs. The pressure on the Coasts to contain costs has been much greater. The Midwest has been a more stable environment."

But Schenkel is quick to add that pressures to contain costs may be mounting here in Indiana. "General Motors will tell you that this is the most expensive health-care state GM operates in," Schenkel says.

Bain Faris is executive vice president of planning and development for Anthem Inc. in Indianapolis, the state's largest health-insurance company, whose products include two PPOs and an HMO. He says managed-care penetration in Indiana depends on definition. While he agrees that generally, managed-care penetration in the state is lower than the national average, he points out that true HMOs - in which a gatekeeper, or primary-care physician, makes the decision for patients' medical care - have been doing battle with PPOs for years.