Less choices, lower pre­mi­ums

Many ex­change plans will of­fer nar­row net­works

Modern Healthcare - - THE WEEK IN HEALTHCARE - M.P. McQueen

Many of the health plans that will be sold on the new state in­sur­ance ex­changes in Jan­uary will of­fer sub­stan­tially smaller net­works of hos­pi­tals and physi­cians than cur­rent health plans gen­er­ally of­fer.

Nearly half the ex­change plans in 13 states with early fil­ings will be of the nar­row-net­work type, ac­cord­ing to an un­pub­lished McKin­sey & Co. anal­y­sis of 955 plan of­fer­ings. En­rollees in such plans will have limited or no cov­er­age if they seek care out­side their plan net­work. In ex­change, sub­scribers will en­joy lower pre­mi­ums than they would pay for plans with broader net­works, in­sur­ers say.

In­sur­ers be­lieve mil­lions of ex­change sub­scribers of mod­est in­comes will ac­cept that trade­off. That would be a big change from the 1990s, when Amer­i­cans largely re­jected HMO-driven re­stric­tions on provider choice and ac­cess. Up un­til re­cently, only a small frac­tion of peo­ple in em­ployer-based and in­di­vid­ual plans have been en­rolled in HMOs.

In­sur­ers in­clud­ing Aetna and Health Net say nar­rower net­works, made up of hos­pi­tals and physi­cians se­lected us­ing cost and pa­tient-out­comes cri­te­ria, are nec­es­sary to keep their ex­change plan pre­mi­ums af­ford­able while still meet­ing the re­quire­ments of the Pa­tient Pro­tec­tion and Af­ford­able Care Act. They in­creas­ingly have of­fered such plans to em­ployer groups over the past few years, tout­ing an­nual cost sav­ings of 10% to 25%. In the largeem­ployer mar­ket, Aetna’s nar­row panels are 15% to 35% smaller than its stan­dard pre­ferred provider panels. Blue Cross and Blue Shield of Illi­nois says its ex­change plans us­ing nar­row net­works will cost 20% to 30% less than its ex­change plans with big­ger net­works.

In­sur­ers say they are able to charge lower pre­mi­ums for nar­row-net­work plans be­cause they can se­lect more cost-ef­fec­tive providers, and in some cases they are able to pay them lower re­im­burse­ment rates in ex­change for fun­nel­ing more pa­tients to them.

But some physi­cian groups, hos­pi­tals and pa­tient ad­vo­cates say they are con­cerned that many of the in­sur­ers’ net­works have not yet been pub­licly an­nounced less than two months be­fore open en­roll­ment be­gins Oct. 1. They fear that pa­tients, par­tic­u­larly those who need spe­cial­ized providers, may not have ad­e­quate ac­cess to care. Last year, the Obama ad­min­is­tra­tion is­sued a rule that in­sur­ers “must main­tain a net­work of a suf­fi­cient num­ber and type of providers … to as­sure that all ser­vices will be avail­able with­out un­rea­son­able de­lay.” It also re­quired that “es­sen­tial com­mu­nity providers” be in­cluded in all plans.

Dr. Reid Black­welder, pres­i­dent-elect of the Amer­i­can Acad­emy of Fam­ily Physi­cians, said that fam­ily physi­cians need to work in tan­dem with spe­cial­ist physi­cians whose work they know and trust and that health plans whose provider net­works are too small could make it more dif­fi­cult to do that.

Bill Bar­cel­lona, vice pres­i­dent of govern­ment af­fairs for the Cal­i­for­nia As­so­ci­a­tion of Physi­cians Groups, which rep­re­sents physi­cians work­ing in man­aged care, said his group has tried to get the net­work fil­ings from the state, “but we haven’t got our hands on any­thing.” He called the ad­e­quacy of the in­sur­ers’ ex­change plan net­works “a big is­sue.” Mem­ber physi­cians also haven’t been able to find out what rates the ex­change plans will be pay­ing.

Sev­eral in­sur­ers con­tacted for this ar­ti­cle ac­knowl­edged that their net­works were not yet fi­nal and won’t be an­nounced be­fore Au­gust and Septem­ber dead­lines for the ex­changes.

Get­ting state, fed­eral ap­proval

Dr. Jeff Ride­out, se­nior med­i­cal ad­viser for the Cov­ered Cal­i­for­nia state ex­change, said some in­sur­ers have built net­works that are “wholly new and cre­ated for the ex­change” while oth­ers are us­ing net­works iden­ti­cal to their cur­rent prod­ucts. He stressed that all plans in­cluded in the ex­change had to get state and fed­eral reg­u­la­tory ap­proval for net­work ad­e­quacy. Cov­ered Cal­i­for­nia says the 12 plans ap­proved for its ex­changes in­clude 80% of the state’s doc­tors and hos­pi­tals.

Bar­cel­lona noted, how­ever, that while in­sur­ers may say they will of­fer tens of thou­sands of providers statewide, what con­cerns con­sumers is how many and which providers are avail­able in their own area. “It’s what you have lo­cally that mat­ters,” he said.

Some nar­row-net­work ex­change plans will ex­clude pres­ti­gious hos­pi­tal sys­tems, such as UCLA Med­i­cal Cen­ter and Cedars-Si­nai Med­i­cal Cen­ter in Los An­ge­les; North­west­ern Me­mo­rial Hos­pi­tal in Chicago; and Van­der­bilt Univer­sity Med­i­cal Cen­ter in Nashville.

The UCLA Med­i­cal Cen­ter and its physi­cians have been ex­cluded by all but one ex­change in­surer as of Aug. 15, said Kim Irwin, a UCLA spokes­woman, who added that all med­i­cal cen­ters in the Univer­sity of Cal­i­for­nia sys­tem have been sim­i­larly ex­cluded.

But other hos­pi­tals will par­tic­i­pate widely in ex­change plans. All of Tenet Health­care Corp.’s hos­pi­tals in 10 states have signed at

least one ex­change plan con­tract, and half its hos­pi­tals have more than one con­tract, a Tenet spokesman said.

Still other hos­pi­tal sys­tems will be of­fer­ing their own ex­change plans, and their provider net­work will con­sist pri­mar­ily of their own hos­pi­tals and physi­cians. Th­ese in­clude the Scott & White Health Plan in Texas, the in­sur­ance arm of a six-hos­pi­tal sys­tem; Pre­ferred One in Min­nesota, which is half-owned by six-hos­pi­tal Fairview Health Ser­vices; and North ShoreLong Is­land Jewish Health Sys­tem in New York.

A num­ber of hos­pi­tals and hos­pi­tal as­so­ci­a­tions con­tacted for this ar­ti­cle de­clined to comment on nar­row-net­work plans on the ex­changes, say­ing it’s too early to tell how they will work. Ellen Pryga, di­rec­tor of pol­icy for the Amer­i­can Hos­pi­tal As­so­ci­a­tion, said ear­lier this year that the re­quire­ments of the health­care re­form law “make it in the in­ter­est of health plans to keep their net­works tight.” Pub­lic hos­pi­tals and aca­demic med­i­cal cen­ters have ex­pressed con­cern that nar­row-net­work plans will ex­clude them, re­duc­ing their num­ber of in­sured pa­tients and boost­ing their bad debt.

Ben­e­fits of nar­row net­works

Juan Ser­rano, se­nior vice pres­i­dent for payer strat­egy at En­gle­wood, Colo.-based Catholic Health Ini­tia­tives, with 86 hos­pi­tals in 18 states, said his sys­tem in gen­eral “be­lieves that nar­row net­works, cou­pled with PPO, POS, or HMO-style ben­e­fits, will en­cour­age health sys­tem dif­fer­en­ti­a­tion in terms of over­all value, and that this over time may fa­vor those who de­liver su­pe­rior health out­comes, ser­vice ex­pe­ri­ence and af­ford­abil­ity.”

Mark Pas­caris, a vice pres­i­dent and not-for­profit an­a­lyst at Moody’s In­vestors Ser­vice, said the con­sen­sus among hos­pi­tal ex­ec­u­tives is they ex­pect ex­change health plans to pay providers rates that are close to Medi­care rates, which typ­i­cally are sig­nif­i­cantly lower than com­mer­cial rates. And he pre­dicted that ex­change plan re­im­burse­ment rates will place down­ward pres­sure on over­all rates.

There also are con­cerns that nar­row-net­work plans will cause risk-se­lec­tion prob­lems in the ex­changes be­cause lower-priced plans with smaller net­works are likely to at­tract younger, health­ier en­rollees and drive peo­ple with se­ri­ous health con­di­tions into plans with wider net­works. That could force all plans to pare down their net­works to sur­vive, thus lim­it­ing con­sumer choice. Then reg­u­la­tors might have to step in.

Two ex­change plan of­fer­ings in Los An­ge­les from Health Net il­lus­trate the cost-sav­ing ad­van­tage to con­sumers of a nar­row net­work.

The Wood­land Hills, Calif.-based in­surer will of­fer a bronze-tier plan with a pre­ferred provider net­work that will cost a 25-year-old en­rollee $195 a month, ac­cord­ing to the Cov­ered Cal­i­for­nia Health Plans book­let up­dated Aug. 6. In con­trast, the in­surer will of­fer a sil­ver-tier plan—with lower cost-shar­ing than a bronze plan—with a nar­rower HMO-type net­work that will cost the same en­rollee $174 a month. That HMO prod­uct costs about 25% less than the next least-ex­pen­sive com­peti­tor, spokesman Brad Ki­ef­fer said.

Health Net is rolling out sim­i­lar low-cost nar­row-net­work of­fer­ings in Arizona and Ore­gon, he said. Doc­tor and hos­pi­tal com­pen­sa­tion will be based on a “mixed model,” which he de­clined to de­scribe in more de­tail.

Ki­ef­fer said the com­pany ex­pects its

“How they do the met­rics has been fraught with dif­fi­culty in the past.” —Dr. Jeremy Lazarus, Amer­i­can Med­i­cal As­so­ci­a­tion

ex­change plans to win broad ac­cep­tance among con­sumers be­cause its “tai­lored net­work” em­ployer group plans al­ready have proved pop­u­lar. In the three states where Health Net does com­mer­cial busi­ness—Arizona, Cal­i­for­nia and Ore­gon—en­roll­ment in tai­lored net­work plans is 37% of its over­all com­mer­cial en­roll­ment. “We are care­ful to se­lect providers that meet the twin goals of de­liv­er­ing qual­ity care in an af­ford­able man­ner,” he said.

At Hart­ford, Conn.-based Aetna, Paul Win­gle, who leads the big in­surer’s ex­change strat­egy, said his com­pany in­tends to of­fer only nar­row-net­work prod­ucts on the ex­changes in up to 14 states, in­clud­ing Arizona, the Dis­trict of Columbia and New Jersey. “We know that on the ex­changes the prod­ucts are more like a com­mod­ity, and price will be king,” he said.

In ad­di­tion, Aetna in­tends to sell nar­rownet­work ex­change plans un­der the Coven­try brand, a com­pany that Aetna ac­quired in May, in Delaware, Iowa, Kansas, Louisiana and North Carolina, though con­tracts won’t be fi­nal un­til the end of Au­gust, Win­gle said. In Florida, Illi­nois and Penn­syl­va­nia, the ex­change health plans will be sold un­der both the Coven­try and Aetna brands.

Aetna in­tends to serve ex­change plan en­rollees through its ex­ist­ing Aex­cel net­work, which in­cludes both spe­cial­ist physi­cians and hos­pi­tals se­lected for qual­ity and cost-ef­fi­ciency, as well as through walk-in clin­ics and ur­gent-care cen­ters, Win­gle said.

Some provider and con­sumer groups are wor­ried that nar­row-net­work plans could dis­rupt re­la­tion­ships be­tween pa­tients and physi­cians. Cur­rently, state rules on the ad­e­quacy of provider net­works vary sig­nif­i­cantly across the coun­try and gen­er­ally are much looser than the fed­eral rules for Medi­care Ad­van­tage plans.

Dr. Jeremy Lazarus, im­me­di­ate past pres­i­dent of the Amer­i­can Med­i­cal As­so­ci­a­tion, warned that such dis­rup­tions could in­crease costs by re­quir­ing pa­tients to un­dergo du­plica­tive ex­ams and tests.

In ad­di­tion, the AMA and the Cal­i­for­nia Med­i­cal As­so­ci­a­tion have ar­gued that the se­lec­tion process for choos­ing par­tic­i­pat­ing providers is flawed. A RAND Corp. study of physi­cian-cost pro­fil­ing pub­lished in 2010 found that “re­li­a­bil­ity of physi­cian cost pro­files var­ied widely es­pe­cially across spe­cial­ties.” Those chal­lenges prompted many in­sur­ers to sign a non­bind­ing agree­ment, called the Pa­tient Char­ter, pledg­ing to base se­lec­tion cri­te­ria on stan­dard­ized qual­ity mea­sures.

“How they do the met­rics has been fraught with dif­fi­culty in the past,” Lazarus said.

Pa­tient ad­vo­cates stress that older pa­tients and those with chronic ill­nesses such as di­a­betes, heart dis­ease and can­cer of­ten re­quire on­go­ing care man­age­ment with sev­eral providers. Such pa­tients who go out of their nar­row net­works could face high out-of­pocket costs. That could cause new bill col­lec­tion headaches for providers.

What about qual­ity out­comes?

Jessie Gru­man, pres­i­dent and founder of the Cen­ter for Ad­vanc­ing Health in Wash­ing­ton, said she worries that ex­change plans will fo­cus too much on keep­ing pre­mi­ums low and not enough on qual­ity and out­comes, and that there isn’t enough re­li­able in­for­ma­tion avail­able for pa­tients to use in eval­u­at­ing providers. “We do bet­ter when we have a good re­la­tion­ship with our doc­tor,” she said. “Any­time you take choice away, peo­ple feel they have lost some­thing valu­able.”

But Sara Rosen­baum, a health pol­icy pro­fes­sor at Ge­orge Wash­ing­ton Univer­sity, pre­dicted that many of the peo­ple who sign up for cov­er­age on the ex­changes will be those who were pre­vi­ously unin­sured, and they will be more con­cerned about sim­ply hav­ing health in­sur­ance than which providers are in the net­work. “The dy­namic is very dif­fer­ent from the mid-1990s,” she said. “Th­ese are not peo­ple who have a lot of choice right now.”

She also said providers and pa­tients bet­ter get used to the idea of nar­row net­works. “I don’t think there is any­thing about this trend that is limited to the ex­change mar­ket,” she said.

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