Health insurance without a net(work)

A major shift could be coming to the Affordable Care Act (ACA) marketplaces. Under a finalized CMS rule, insurers will be allowed to offer nonnetwork health plans on federally facilitated ACA exchanges beginning with the 2028 plan year. State-based exchanges could allow nonnetwork plans to be offered next year.

This move could usher in a new class of low-premium plans into the individual ACA exchange market while also raising major concerns about consumer protections, provider reimbursement disputes and market stability.

Proponents of nonnetwork plans say they are an answer to the mounting affordability concerns in healthcare. By eliminating the costs associated with creating networks and paying lower rates, nonnetwork plans are expected to have low premiums. They are also predicated on the notion that members will have free rein to shop for low-cost, high-quality care and, therefore, drive providers in that direction. Critics say that it is unrealistic to expect individuals to shop for healthcare that way, especially when multiple providers are involved in providing a medical service, such as surgery, and that nonnetwork plans may lure people in with low premiums but leave them exposed to uncovered medical bills. The critics are also concerned that more conventional network plans, especially in the ACA market, will become unaffordable because the nonnetwork will siphon off healthier individuals.

“This would be a significant shift for the ACA marketplaces,” says Josh Schultz, head of government affairs at Softheon, a healthcare technology company that provides enrollment, billing, payment and member-management platforms for health insurers and government healthcare programs. “Provider networks have always been a major part of how plans are built and how consumers compare coverage.”

For healthcare executives, insurers and providers, CMS’ decision may represent the early stages of a broader transformation in how commercial coverage is structured and priced.

Low premiums

Traditional health insurance depends heavily on negotiated provider networks. Insurers contract with hospitals and physicians in advance, establishing reimbursement rates and defining which providers are considered in network for plan members.

Nonnetwork plans eliminate much of that structure. The plans, sometimes referred to as reference-based pricing (RBP) plans, would be a sharp departure from provider networks. Instead of negotiating rates with providers and building a network, nonnetwork plans establish set amounts — the

reference-based price — that they will pay to providers. Their participants would then be free to use any provider they wish, with the understanding that the nonnetwork plan will pay that set amount for the medical service. If the provider charges more, the member must make up the difference.

“Unlike a PPO [preferred provider organization] plan, a nonnetwork or reference-based pricing plan typically has no contracted provider network,” says Navin Nagiah, M.S., CEO and cofounder of Daffodil Health. “Some RBP vendors market this as ‘You can go to any provider you want,’ and while technically that’s true, the reality is more nuanced.”

One of the major appeals is low premiums. Because insurers are not paying commercial rates — which can reach 250% to 400% of what Medicare pays in some markets — premiums are often substantially lower.

Although nonnetwork plans would be new on the ACA exchanges, self-insured employers have already started offering them to their employees. Nagiah says employers are looking for a deal. “Self-funded employers have been adopting RBP for years as a low-cost option,” he notes. “Some employers are desperate enough that this is the only way they can keep offering coverage to employees and their families.”

Imagine360 is one of the companies selling nonnetwork plans in the self-insured market.

“We work with more than 1,000 employer clients across the U.S.,” says Jeff Bak, CEO and president of Imagine360. “An independent actuary found we deliver about 20% savings compared to traditional employer plans.”

Bak says that Imagine360 is not currently committing to entering the ACA exchange market but is monitoring developments closely because of its experience with reference-based pricing models. The company’s approach uses Medicare-based reimbursement formulas rather than traditional negotiated hospital rates.

“Because we’re pricing off of Medicare, there’s not as much inflationary pressure as you might see in a traditional PPO plan,” Bak says. Renewals are more abated and a little more reasonable every year, he adds, “because we’re pricing based off of Medicare and not off of hospital chargemaster bill charges.”

Clear explanation needed

Although CMS finalized the rule opening the way for nonnetwork plans on ACA exchanges in May, significant operational and regulatory questions remain unresolved. One of the largest challenges involves consumer understanding.

“These details can’t get buried in enrollment materials or broker displays,” Schultz says. “Consumers will need very clear explanations about how reimbursement works, whether balance billing is possible and what happens if a provider does not accept the plan’s payment structure.”

The Association for Community Affliated Health Plans has “come out very strongly” against nonnetwork plans, says Margaret A. Murray, M.P.A., the organization’s CEO and a longtime member of the Managed Healthcare Executive editorial advisory board. Murray characterizes the amounts that the nonnetwork plans are willing to pay as a kind of coupon that members can use to buy services. “But then,” she says, “if the provider ends up charging you more — and there’s no reason they wouldn’t — you are on the hook for the additional amount. It’s really underinsurance.”

CMS has outlined some prohibited marketing practices and additional consumer protection standards for nonnetwork plans sold on the ACA exchanges, but industry observers expect scrutiny over broker and web-broker sales practices to intensify as implementation approaches. Katie Keith, J.D., M.P.H., director of the Center for Health Policy and the Law at O’Neill Institute at Georgetown Law School, wrote a detailed analysis of the CMS final rule for Health Affairs that was published in late May. According to Keith, nonnetwork plans sold on the federally affiliated exchanges (which are the Healthcare.gov exchanges) will be required to disclose the percentage of providers in the plan’s service area that accept the plan’s set amounts as full payment. The plans will also be required to provide information about claim submissions, costs, documentation standards and administrative processes that buyers of the plans will be expected to use, Keith wrote. Other requirements include disclosure of benefit amounts and anticipated out-of-pocket costs and an exceptions path for enrollees who can’t find a provider that accepts the plan’s amount as full payment.

Ellen Montz, former deputy administrator and director at the Center for Consumer Information and Insurance Oversight at CMS, says major questions remain unanswered regarding how the plans would comply with existing ACA consumer protections. Neither the proposed nor the final rule explained how nonnetwork plans would comply with essential cost-sharing and access protections of the ACA and the No Surprises Act, Montz says. The No Surprises Act is designed to protect patients from large medical bills if they unknowingly get services from an out-of-network provider.

Montz also questions whether consumers shopping on the exchanges would fully understand how dramatically these products differ from traditional network plans. “It is hard to believe that a consumer purchasing such a plan on the marketplace would have the appropriate information they would need to understand the dramatic differences between a nonnetwork plan and a network plan when they are shopping,” she says.

Another unresolved issue is how CMS will determine whether nonnetwork plans provide adequate access to care without traditional provider networks. “That’s the legitimate critique,” Nagiah says. “These plans only work if providers actually accept the benefit amount, and CMS hasn’t defined how it will measure that.”

Provider organizations, health systems and hospital associations are expected to closely monitor the uptake of nonnetwork plans. If nonnetwork plans are successful, they could seriously threaten the revenues of providers and health systems.

“That’s part of why provider associations like the AHA [American Hospital Association] and FAH [Federation of American Hospitals] pushed back hard on CMS’s decision to allow these plans on the exchanges,” Nagiah says.

Montz also warns the plans could affect the broader ACA marketplace if they are not required to compete on equal footing with traditional exchange products.

“Without the requirement to operate on a competitive level playing field, nonnetwork plans may be lower premium, reducing the value of the tax credit for those who do not want or cannot spend the time to negotiate for their own healthcare services,” Montz says.

Balance billing worries

For patients, the biggest concern surrounding nonnetwork plans is balance billing. Because providers have not contractually agreed to accept an insurer’s reimbursement amount, patients can sometimes receive bills for the difference between what the provider charged and what the insurer paid. “A member who receives a $40,000 hospital bill where the plan pays $15,000 can be left with a $25,000 balance bill,” says Nagiah. The No Surprises Act protects patients in many emergency situations, but nonemergency care could still trigger disputes depending on how claims are handled.

Felicia Sadler, M.J., vice president of quality at Relias, a healthcare workforce education and compliance technology company, says affordability alone should not define whether coverage is successful. “The idea of having more affordable and flexible plan options sounds like a positive step,” says Sadler. “But are these options going to give consumers the access to care and financial protection they reasonably expect when they sign up for health insurance?” Sadler notes that many consumers may not fully understand the trade-offs involved with RBP plans until they encounter reimbursement disputes firsthand.

“Low monthly rates may seem enticing, but without a clear explanation of plan benefits, patients may receive unexpected bills or have to suddenly change doctors,” she says. “It’s not a true choice if patients don’t fully understand what they’re signing up for.” She also warns that fear of surprise costs could discourage some patients from seeking care altogether. “These models can create barriers to care if patients are so worried about surprise costs that they avoid seeking care in the first place,” Sadler says.

Beyond patient concerns, nonnetwork plans could also create new administrative burdens for hospitals and physician organizations. Because reimbursement disputes often happen after claims are submitted, providers may need expanded revenue cycle operations to manage appeals, negotiations and independent dispute resolution cases tied to the No Surprises Act.

“RBP claims often require more back-and-forth than network claims,” Nagiah says. “Provider revenue cycle teams have to build dedicated capacity to handle these claims, which adds real cost.”

Rahul Shivkumar, cofounder of Assured Health, an artificial intelligence-powered provider network management platform, says the plans may also disrupt traditional provider enrollment and credentialing workflows.

“Traditional network participation gives providers a fixed reference point for enrollment, credentialing and revalidation,” Shivkumar says. “Without that contracted structure, reimbursement alignment becomes something organizations have to monitor actively rather than maintain through a renewal cycle.”

He adds that provider organizations may not discover reimbursement problems until claims are denied.

“In most cases, the first signal is a denied claim, not a proactive alert,” Shivkumar says.

Nonnetwork models can also generate more reimbursement disputes than traditional PPO structures, but companies operating in the space have developed extensive systems to manage those situations.

“We support the member and the plan with any type of requests for more reimbursement or balanced billing,” says Bak of Imagine360. “We’ve got a whole ecosystem and playbooks that know exactly how to handle those inquiries from a provider.” Bak says that approximately 97% of his company’s reimbursements are accepted on first submission. “And no member or employee in the history of working with Imagine360 has ever had to pay more than their deductibles or out-of-pockets for care rendered,” he says.

Entering the mainstream

The biggest unanswered question may be whether nonnetwork plans remain a niche product or eventually become a meaningful segment of the ACA marketplace.

Supporters argue that rising healthcare costs will continue pushing employers, insurers and consumers toward lower-cost alternatives. “The same skepticism was applied to narrow-network HMOs [health maintenance organizations] in the 1990s and high-deductible plans in the 2010s,” Nagiah says. “Both became mainstream because they solved the cost problem for a specific segment of the market.”

Still, many healthcare leaders believe the long-term success of the model will depend heavily on consumer protections, transparency standards and provider participation.

“There is room for additional product differentiation within the construct of the ACA marketplaces,” Montz says. “But without a level playing field for competition, real consumer harm could occur both for those purchasing the plans with uncertain protections and those not purchasing the plan in the form of market instability and tax credit changes.”

Sadler says the success or failure of the plans may ultimately come down to whether consumers can confidently use the coverage they purchase. “If patients need a lawyer, a billing expert or a healthcare administrator to understand coverage language or agreement terms, the plan has already failed them,” Sadler says. “The ultimate test is not whether these plans will lower premiums, but [whether] patients can actually afford to use their coverage when and where care is needed.”

Keith Loria is a medical writer in Virginia and a regular contributor to Managed Healthcare Executive.