Julie Miller

	Selective provider networks is nothing new. It is evidence of the continuing tradeoffs in the delivery of-and payment for-health services.

	It could be weeks or months before the situation between UnitedHealthcare and its recently 

 physicians is sorted out in the appeals process, but the larger issue is how revenue pressure on insurers is playing out in the market.

	"The moves that United is making in Rhode Island, as well as in many other states across the country, to remove selected physician groups from its Medicare Advantage network seems to indicate a material change in their contracting strategy,” says Jim Donohue, a leader in ECG's Contracting and Reimbursement practice.

	Medicare Advantage plans are taking a hit as the federal government waters down payment and cuts back on star-program bonuses.

	“United, like other health plans, likely anticipates further downward pressure on their revenues from the federal government,” Donohue says. “In response, they seem to be transitioning to a smaller provider network, through which they believe they can more effectively manage medical costs and quality measures on which the health plan is evaluated and which impact their financial performance."

	Additional profit pressures include medical loss ratio limitations, uncertain risk pools and provider merger activity.

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Network selection is one tool plans are using to overcome cost pressures

MA plans taking a hit

	America’s Health Insurance Plans’ (AHIP) President and CEO Karen Ignagni sent a 

 to the Centers for Medicare and Medicaid Services (CMS) expressing concerns about the impact of  Medicare Advantage payment cuts related to the Affordable Care Act (ACA).

	More than $200 billion in payment cuts are expected. According to AHIP, Medicare Advantage plans are “facing a reduction in payments in 2014 at the same time healthcare costs continue to rise.”

	UnitedHealthcare, Humana and others have sent termination notices to providers, indicating that ACA pay cuts have forced their hand in making network reductions. United is not disclosing the specific criteria it used to decide which providers to eliminate. However, the plan stated to the Hartford (Conn.) Medical Assn. that it considered quality, physician panel size and cost of the providers’ services. Approximately 19% of the plan’s physician network in Connecticut will be terminated as of February 1, 2014, but in other states, reductions are as high as 45%, according to the association.

	J.D. Kleinke, healthcare economist and MHE editorial advisor, believes the termination of providers is usually-but not always-related to the prices the providers command from their insurance partners.

	“They’re going to a smaller network with lower price,” Kleinke says.

	One way health plans are helping to mitigate the ACA cost impact is by creating narrow networks-a trend happening not just in Medicare Advantage but also in the exchange markets. Such high-value provider networks limit contracts to a smaller number of physicians that have a track record of providing quality and cost-efficient care delivery. AHIP’s letter asks CMS to resist efforts to limit the ability of Medicare Advantage plans to establish narrow networks because it could result in benefit cuts and higher out-of-pocket costs for seniors.   

	“Medicare health plans are doing everything they can to keep coverage as affordable as possible for the more than 14 million seniors and people with disabilities who rely on this critically important part of Medicare,” says AHIP spokesperson Clare Krusing.  “Medicare Advantage continues to be popular among Medicare beneficiaries because of the better services, higher-quality care, and additional benefits these plans provide.” 

	The federal government will reduce payments to Medicare Advantage plans to move them more in line with its outlays for traditional fee-for-service Medicare, with a gradual reduction over the next several years. Bonus payment for the star quality program will also be reduced.

	An additional concern could also be the overall attractiveness of the Medicare Advantage market in the future. If private insurers don’t see value in participating, many could exit the market, causing mass policy discontinuations for seniors, as they did a decade ago in Medicare+Choice. Open enrollment 2014 also saw a 5.3% decrease in available plans, according to 

	About one-third of Medicare beneficiaries are in Medicare Advantage private plans.

	Plans are struggling to react quickly to the chaos of the ACA rollout, including the sudden about-face on discontinued plans. The administrative costs are mounting at a time when administrative expenditures must be limited under the ACA’s rule on medical loss ratios. While they don’t want to return to the status quo, they are no doubt tempted to limited their participation and adopt a new wait-and-see attitude.

	The Kaiser Family Foundation also reports support for the law has dropped significantly in the public eye. In its November tracking poll, roughly half of the consumers surveyed (49%) how hold a negative view of ACA, while 33% hold a positive view.

	In the four years of polling consumers on the law, KFF notes, the gap between negative and positive views has been this large only once before: in October 2011 in the ramp up to the Republican presidential primaries.

	The shift in public opinion can be attributed to a number of factors:

			The problems plaguing the exchange web sites, most notably healthcare.gov;

			News coverage of discontinued plans that are not ACA-compliant, even though President Obama had previously promised Americans could keep their plans;

			The advent of narrow networks, reducing access to established providers for some health plan members.

UnitedHealthcare and other plans are dropping network providers

Insurers pinched by ACA cuts in MA

	An estimated 14 million consumers are covered by individual policies. The Associated Press has estimated about 4.2 million have received some type of notice from an insurer indicating a discontinuation of their non-grandfathered plan.

	The following states are allowing local insurers the option to continue the plans through 2014:

The following states are allowing local insurers the option to continue non-grandfathered plans through 2014.

States that will allow renewals

	On November 5, Blue Shield of California agreed to allow existing policy holders of non-grandfathered plans to extend their coverage until March 31, 2014. The state department of insurance allowed the extension, however, it has not yet decided on whether to allow California insurers to extend plans through all of 2014.

	The trouble is, Covered California, the state-run exchange, included a stipulation in its contracts that required participating health plans to discontinue their non-grandfathered policies. Until it receives approval from the state insurance commissioner and a change with the agreement with Covered California, Blue Shield will have to wait.

	When President Obama this week bowed to public pressure regarding the estimated millions of plan cancellations, it opened up the option for insurers, with the approval of insurance commissioners, to extend the existing plans.

	According to Blue Shield, extending coverage is confusing for members already unsure of significant changes in the market.

	 “There was some confusion with people who bought individual policies after March 2010 who believed that they could keep it,” said Paul Markovich, president and CEO of Blue Shield of California, in an exclusive interview with 

 after the initial plan extension. “What’s happening now is health plans, in order to be compliant, are bringing all of their products and plans up into compliance with the minimum benefits established in the Affordable Care Act, and are saying, ‘I have to drop that plan, and I have to map you to a new plan that’s ACA-compliant.’”

	He believes structuring health reform so grandfathered plans could only date from 2010 or earlier made sense to shore up the risk pool in the exchanges.

	“If you allowed grandfathering all the way up until December 31 of this year, the types of people who prefer a leaner benefit and a lower price are the kinds of folks that don’t see themselves using services,” he says. “So you can certainly imagine a much younger, healthier population signing up for a grandfathered plan at a lower price point and not joining those exchanges or dropping the policy and joining the richer plan once they had a health issue.”

	Blue Shield and other health insurers are referring to the recent 

from America’s Health Insurance Plans regarding industry sentiment toward Obama’s announcement to allow year-long extensions. Most plans believe an extension would unravel the market and cause adverse selection in the exchanges.

In California, the commissioner and the exchange must reach an agreement

Author | Julie Miller

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MA plans taking a hit

Insurers pinched by ACA cuts in MA

States that will allow renewals

Plans waiting on decisions before extending policies