Insurers draw fire for narrowing networks

January 17, 2014

Patients, plans weigh tradeoffs between lower premiums, fewer doctors.

Under pressure to control costs in a rapidly changing and uncertain healthcare market, insurers are slimming down provider networks in plans offered through federal and state exchanges and by Medicare Advantage (MA) plans. Similarly, plans and pharmacy benefit managers are establishing “preferred” pharmacy networks to control outlays on prescription drugs.

Doctors and hospitals have been fighting back, claiming that patients will lose choice and access to quality care. Officials in Maine and New Hampshire went after Anthem Blue Cross Blue Shield last fall for marketing exchange plans that excluded certain state hospitals. In Washington state, several insurers were kept off the exchange initially due to “inadequate” provider networks. Similar issues emerged in South Dakota, Pennsylvania and Mississippi, where legislators cited “any willing provider” laws requiring insurers to include any provider that accepts its terms.

Cuts in providers covered by MA plans have also drawn protests and legal action. Physicians in Connecticut filed suit in December to block UnitedHealthCare from dropping more than 2,000 doctors from its MA plan in that state. State medical societies in Ohio, New York and Florida weighed similar action against plans moving to cancel or change contracts with doctors and hospitals. The network changes in Connecticut drew attention on Capitol Hill, prompting a Senate hearing and proposals to require notice in advance of the annual MA open enrollment period of provider network changes. 

Insurers say that slimmer networks are a way to maintain low premiums and copays in the face of major reductions in MA rates. Private Medicare plans have to meet clear “network adequacy” standards, they emphasize, noting that their aim is to establish “high value” and “high performing” provider networks that offer quality care.

Costs vs. coverage

Many consumers and payers accept the trade of limits on provider access for lower premiums. A December poll of small employers found the majority willing to offer plans with narrow networks if that means reduced costs.

Anxious to avoid “sticker shock” when consumers began shopping for coverage, the Obama administration approved many lower-cost Bronze plans with more limited provider rolls. As Qualified Health Plans can’t exclude less healthy individuals and must offer minimum essential benefits, a way to keep a lid on premiums, deductibles and copays is to establish narrow or “ultra-narrow” networks.

Former HHS Secretary Mike Leavitt explained in a recent interview with Kaiser Health News that some consumers prefer to have fewer choices in providers and to assume added risk if that means lower premiums. While the tradeoff is not good for everyone, Leavitt emphasizes that “you can’t constrain costs” unless insurers have the ability to narrow networks over time. “If you require everyone to have everything, then costs will continue to go up.”

Steering beneficiaries to restricted networks is nothing new. Kaiser Permanente has long had a limited cadre of doctors and hospitals employed by the Kaiser system, and perennially earns high marks for quality and access. 

Ironically, Congressional Republicans, who otherwise might agree with Leavitt’s argument, seized on provider curbs as another opportunity to attack President Obama for promising Americans that his program would let them keep their doctors, as well as their current plans.

The idea that plans can save money by managing networks more tightly is supported by greater transparency in hospital and provider rates that reveal huge differences in charges for common procedures-with little correlation to quality.

 

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