This paper reports the results of a national survey on employer experiences with preferred provider organizations (PPOs). The survey, conducted in 1987, included information from almost 700 telephone interviews with employee benefit managers. We found that 11 percent of employees are in PPOs. PPOs now have a strong presence among employers of all sizes. However, whereas they are a major force in the West, where almost one-third of employees are members, they have garnered only a 1 percent market share in the East. We examine the impact of PPOs on health insurance premiums and on employer satisfaction. The results show that in 1987, the year of the survey, PPOs appeared to provide mild cost savings compared to conventional insurance, and that employers were very satisfied with almost all aspects of PPOs, whereas they were surprisingly critical of their HMOs.

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