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Pushback from members has caused regulators to take notice.
Slimming down the list of preferred providers is one of the primary tools plans have left to keep premiums low and quality high. Changes under the Affordable Care Act-specifically guaranteed issue and adjusted community rating-have left plans with a renewed interest in contracting with only the highest value hospitals and physician practices.
Narrow networks aren’t new, of course. The trend started about a decade ago but has accelerated under health reform.
However, pushback from members-who believe their plans don’t have enough providers or the right providers for their needs-has caused regulators to take notice. Mississippi and Pennsylvania are considering bills that would more tightly regulate the number of doctors and hospitals in a network, while the federal government has released a new proposal that would have insurers submit their network lists for review before being approved to participate on the federally operated exchange.
Unlike the HMO networks of the past that plans eventually backed away from in favor of PPOs, today’s narrow networks will likely have longer tenures. What remains to be seen is how just “narrow” a narrow network can be.
The use of narrow networks by health insurance plans is a complicated balancing act, simultaneously seeking to lower premiums while still offering a selection of quality providers to consumers. The success of such networks hinges on consumers accepting the tradeoff of limited provider access for lower rates.
“Nobody wants to pay premiums, much less higher premiums, but everybody wants access to every doctor they want to see,” says Lee Harrell of the Jackson, Miss., offices of Baker Donelson. “So, it’s a Catch-22 from the regulatory perspective. Each commissioner is charged with keeping the health insurance markets affordable, as well as keeping the health insurance industry solvent and available.”
While the Affordable Care Act (ACA) and the advent of exchanges may be escalating the narrow network trend, the concept of limiting networks is reminiscent of HMOs of the 1980s and 1990s. Although the latest iteration of narrow networks may be an improved version, Harrell says they will still present many of the same challenges.
“The access to providers versus keeping the premium affordable is a challenge that all state regulators are faced with on a daily basis when they are looking at rate increases,” he says. “These challenges will only increase with the implementation of the ACA.”
Harrell, who previously worked as Deputy Commissioner and General Counsel for the Mississippi Insurance Department, says the situation is further complicated by the fact that regulators have jurisdiction over the insurer, but not over the providers.
“The commissioners regulate the price that a health insurance company charges its policyholders; they control that part of the equation, but who controls what the providers charge?” Harrell says. “That part is not regulated. That’s the free market system.”
Therefore, he says, broadening networks to allow all qualified providers could conceivably nullify the main leverage insurance companies have over providers, especially considering ACA rules demand guaranteed issue and adjusted community rating.
“Would it be easier if insurance companies allowed anybody and everybody who was qualified into the network? Well, on the one hand, they wouldn’t have to deal with the issues involved in offering narrow networks,” Harrell says, “But then what incentive is there for the provider to discount what they charge? That incentive is then somewhat diluted or diminished, or even done away with, without the network issue.”
It is the promise of inclusion in a narrow network, and the patient volume and reimbursement it brings, that prompts providers to offer competitive prices.
“If the out-of-network doctor gets the same reimbursement as the in-network doctor, what incentive is there for the in-network provider to discount, say 20%? If they lose that incentive, are they going to continue to discount? Historically, the answer has been no,” he says.
Also, this dilution of competition has been an obstacle to the passage of “any willing provider” legislation.
“What’s going to happen if the providers stop offering competitive discounts? Ultimately, the way it’s borne out in my regulatory experience is, the carrier’s going to pay,” he says. “And if the carrier pays more, then ultimately, the consumer’s going to pay more.”
According to Wendy Sherry, vice president of development at Cigna, the provider competition fostered by narrow networks not only lowers prices, but raises the bar for performance.
“Because there are fewer providers in a narrow network, this should lead to price and quality competition among them,” she says. “There will not be room for everyone. As the use of narrow networks continues to increase, this leverage will also increase.”
Sherry says in striving to compete on the highest level, providers will be able to promote their “brand” while offering quality patient care. While patients largely association higher cost with better care, they also need to hear the message that affordability can equal quality care, she says.
Provider competition for customers could also include providers seeking to market their own networks, Sherry says.
“Provider systems are certainly exploring entering the health insurance business,” she says. “Leveraging the respective strengths of providers and insurers will lead to better affordability and quality of care for consumers.”
Harrell says for the insured who live in rural areas of the country, it is a significant challenge to find any in-network providers nearby, much less the patient’s preferred provider.
“You might have patients driving 60, 70, 80 miles to get to a hospital for childbirth, for example.”
Sherry says Cigna’s narrow networks aim to provide the same level of geographic accessibility as the plan would through a provider network of any size.
“Cigna approaches narrow networks with the same guidelines for network adequacy as for our larger networks,” she says. “We seek to ensure that there is good access to care to treat all covered services within a reasonable distance from a customer’s home.”
Harrell says although the issue of adequate network options in rural areas continues to be a challenge, there are several valid approaches to mitigating this problem. One, he says is the use of telemedicine where appropriate.
“We have companion deals pending in our Mississippi state legislature as we speak. They’ve both passed out of their respective committees, promoting the benefits of telemedicine,” he says. “That is expected to help, especially in these rural areas where patients would otherwise have to drive 70 or 80 miles in one direction.”
He says telemedicine would enable a patient to be seen by a local doctor, who could then conference with a remote provider. In today’s connected world, the consultation can occur in real time. Telehealth has the potential to save costs from the consumer perspective and the payer perspective. Increasingly, insurers are reimbursing physicians for telehealth.
In an effort to control costs while still maintaining some degree of consumer choice, some payers have instead opted for tiered networks. By varying out-of-pocket costs, plans can funnel members to high performers.
“The way we structured our game plan was to not limit access, but rather enhance what is being offered to members from an out-of-pocket and cost-share standpoint when they access our tier-one providers,” says Mike Munoz, senior vice president of sales and marketing for AmeriHealth, New Jersey. “For example, they might have a $30 coinsurance advantage on certain services, or a $30 copay for certain services, for using a tier-one provider.”
Munoz says AmeriHealth has partnered with Cooper University Health in Camden, N.J., to offer a branded network. The tier-one benefits would be offered to those who use the Cooper Advantage Network, which includes the hospital and more than 100 outpatient offices. According to AmeriHealth, a visit to a Cooper primary care physician might result in a $15 copay, for example, while a visit to a physician within the broader Local Value network might be $50.
“Patients always have access to tier-two providers; they just get an enhanced out-of-pocket experience when accessing the tier-one providers,” Munoz says.
He says most of the relationships that havebeen structured in narrow networks are driven by volume. But AmeriHealth needed to look at it differently, not being the largest player in the marketplace. Rather, the payer and provider work together toward sustainable, long-term cost savings, and lower premiums over time. Cooper has a 20% interest in AmeriHealth New Jersey with the option to buy more equity in the future-a deal the two struck in May 2013.
Munoz says consumer education is essential in a tiered network, adding that AmeriHealth is working with providers to offer consumer outreach.
“It’s also very important to make sure we provide enough variation in our product offerings so that people can make these decisions based on what is right for them,” he says.
AmeriHealth’s portal has implemented various technologies for a more consumer-focused approach, Munoz says. The portal asks consumers a series of questions designed to direct them toward the best coverage.
“If, for example, you need more of an expansive, low out-of-pocket program because you are high utilizer, these tiered networks might not be the best, unless your provider participates with them,” he says.
For the average consumer without an ongoing need for specialized medical care, narrow or tiered networks might represent lower premiums or copays without reduced quality of care. However, for patients with specific medical needs, such as cancer treatment, narrow or tiered networks may make care delivery cumbersome for the member and ultimately affect outcomes.
According to a report recently commissioned by the Leukemia and Lymphoma Society, many of the health plans available through the ACA exchanges have limited access to National Cancer Institute (NCI) designated cancer or transplant centers. These insurers also charge what the group considers high out-of-pocket expenses-often at least $2,000 and $4,000 respectively-for patients purchasing silver or bronze plans. The report, “2014 Individual Exchange Policies in Four States: An Early Look for Patients with Blood Cancers,” evaluated coverage benefits and premiums for plans offered by four state exchanges: California, New York, Florida and Texas, specifically for blood cancer care.
In terms of network adequacy, the study, which was conducted by Millman, found that many of the providers and hospitals that cancer patients depend on are largely excluded from the new exchange plans. According to Brian Rosen, senior vice president of public policy for the Leukemia and Lymphoma Society, the current exchanges also limit access to tertiary care centers for specialized cancer care.
“At a comprehensive cancer center, the patient has access to the skill andexpertise of a team of clinicians-a highly specialized medical team that can provide an integrated approach in caring for a patient,” Rosen says. “We also don’t know to what extent the networks are excluding community medical oncologists.”
Rosen says the society is currently working with Congress and the Centers for Medicare and Medicaid Services to ensure better network adequacy for patients with blood cancer.
“The insurance companies need to ensure the availability of tertiary cancer centers. If they are not in the network, they should at least be recognized as a contracted facility,” he says.
Harrell says although the narrow network situation is currently a source of concern for consumers, it will be examined at the federal level.
“Network adequacy provisions in the Affordable Care Act have not all been formulated, but sooner or later, I’m sure there will be further regulations and guidance on this from the federal government,” he says. “But right now, it’s a terrible situation from a regulatory perspective. It’s not just about ‘evil’ insurance companies or ‘evil’ commissioners. It’s a very difficult balancing act.”
For employers, too, Harrell says the choice between a larger network and a lower premium for workers is a difficult decision. With the typical employer shouldering the larger portion of the premium, most want to find any means necessary to reduce their health benefit outlays.
“They want to ensure adequate care for their employees, but they don’t want to pay $100 when they could pay $70,” he says.
Harrell says, if consumers are forced to make the choice between lower costs or more choices, they will choose the lower costs.
“I have never had a consumer thank me for a rate increase,” he says. “We get calls from consumers about the costs, and we get calls from consumers about wanting to see Dr. X. And in my experience, at the end of the day, consumers would rather be limited and have affordable premiums.”
Jennifer Byrne is a freelance writer based in Glassboro, N.J.
Read the proposed federal guidance here.
See what Kathleen Sebelius says about narrow networks here.