Why insurers want to limit your choice of doctor

November 25, 2013
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In a new story for IBJ, I wrote that suburban hospitals around Indianapolis believe they may have an advantage over their larger brethren in the new health care world taking shape.

That’s because suburban hospitals have a lower cost structure than the large systems like Franciscan Alliance, St. Vincent Health and especially Indiana University Health. In simpler terms, they mean they didn’t engage in the building, merging and doctor-buying binges that their larger peers did over the past decade.

While that means the smaller hospitals don’t have all the specialized services of larger systems, it does mean they can offer the lion’s share of services that patients might need for lower prices.

Until quite recently, no one cared about health care prices. They were focused primarily on health insurance premiums, as a proxy indicator of cost.

But now in the individual insurance market, Obamacare has taken away health insurers’ main tools for keeping premiums low, explains health insurance veteran Bob Laszewski in a helpful blog post.

The first tool was avoiding sick people. Obamacare said health insurers can’t do that anymore.

The second tool was limiting benefits—lifetime maximums on claims expenses and lack of coverage on certain medical conditions, such as pregnancy. Now Obamacare requires all insurance policies, both on and off the exchange, to include a set of 10 “essential health benefits” whether policyholders want them or not.

That is the main reason insurers have now decided to cancel the policies of an estimated 108,000 Hoosiers—about 60 percent of the individual insurance market here.

But since customers are still focused on keeping their premiums low, what can insurers do?

One option is to make deductibles high, which they are doing.

A second option is to cut out high-cost providers or, alternatively, to force providers to cut their prices in order to be one of a select few choices presented to consumers in these new Obamacare plans.

These are called narrow networks. I’ve explained the narrow network concept thoroughly before.

Rob Hillman, president of Anthem Blue Cross and Blue Shield, said that Anthem embraced narrow networks to offset the cost of Obamacare's new coverage requirements so Anthem could offer premiums that were competitive with the Obamacare's $95 per-adult penalty for not buying health insurance. (The Obamacare penalty rises to $395 in 2015 and $695 per adult in 2016.)

"Can you get a premium that is attractive enough to compete with the penalty? That's why narrow networks are so important, because you have to find a way to get to that premium level to compete," HIllman said during the IBJ Health Care Power Breakfast on Sept. 25.

Anthem told hospital systems it wanted a 10 percent price cut for insurers to join its insurance network. Its rate filing with the Indiana Department of Insurance suggests it received a 9 percent reduction.

It could have received those reductions, however, just by picking lower-cost providers.

To understand how much insures could save, I followed Laszewski's example and turned to a recent study by the Center for Studying Health System Change.

It showed that Indianapolis hospitals’ inpatient prices—real prices, not charges—ranged from 176 percent of Medicare rates to 236 percent of Medicare rates.

Outpatient prices ranged even more, from 317 percent of Medicare rates to 417 percent.

All else being equal, steering patients to only the lowest-cost hospitals could, according to those data, could save insurers from 10 percent ot 13 percent off the average cost of all the hopsitals in Indianapolis.

In central Indiana, the hospitals that are in the Anthem plan are all perceived as the lower-cost providers: Community Health Network, which has been pursuing an explicitly low-cost strategy; Wishard Health Services, which is one of the lowest-cost hospitals in the country; and the suburban hospitals represented by the Suburban Health Organization.

In the long run, I view the narrowing of networks—especially in the individual market—as a good change that will help keep the cost of health care and health insurance a bit lower.

But in the short term, this transition will not be smooth. If you had an Anthem policy before and went to a doctor in St. Vincent’s network, you are going to have to switch off the Anthem policy or else find a new doctor. In some cases, patients may have to find a new health plan and a new doctor.

This may not have been much of an issue, if there were lots of insurers participating in the individual market. But, with lots of small players and even a giant like UnitedHealthcare pulling back in 2014 from Indiana’s individual market, there aren’t many other networks to switch to that may offer the combination of doctors, benefits and premiums that most suits each customer’s needs.

So that means Obama’s past statements, like this one in 2009 to the American Medical Association, will not prove true:

"No matter how we reform health care, we will keep this promise: If you like your doctor, you will keep your doctor. Period. If you like your health care plan, your will keep your health plan. Period. No one will take it away. No matter what.”

If there’s another scandal to erupt after the rollout of Obamacare, the loss of choice in doctors is likely to be it.

  • Say, Bob...
    ...since when have my premiums been "low"? It's worth remembering that there has historically been very little competitive pressure to "keep premiums low"; during the period 2005-2011, insurance costs for our Indiana-based business rose, on average, 13% each and every year (one year it rose nearly 20%). As a small business (employing 30-50 people over that period) we found actually had very few choices with any real cost differences. Add to that the fact that these benefits were something we had to spend a fair number of hours managing and, boy, do I truly long for canadian-style single payer. Barring that, the idea that the previous system was somehow preferable and that we should have legislatively done nothing simply does not pass the sniff test here.
  • Is This Only Indiana?
    I always have to ask the question regarding the ACA (Obamacare), are the conclusions of your article just tailored to Indianapolis, or is this the case nationwide? Indiana has had a leadership that has resisted ACA at every point-- even suing the Federal Government to do away with health care policy subsidies. There has been such a contentious atmosphere that it would be surprising if insurers put forward their best plans for Hoosiers. On the other hand, and here's my question-- Do other states (like OR, CA, KY) who have been working with insurers and ACA have the same limited doctor networks and high prices?
    • To MilesToGo
      The short answer to your question is, yes, other states are seeing narrow networks, including California. The move to narrow networks has been a national trend. But your question does make me want to know how Indiana compares on these fronts. We know that exchange premiums in Indiana are high compared to other states in the federal exchange, but I don't know how the state compares to those running their own exchanges. As for whether networks are narrower in Indiana than in other more pro-ACA states, I have very limited knowledge at this point. In Washington state, which has one of the most pro-ACA insurance commissioners, a hospital system has sued the insurance department because it was left out of insurance networks. But that's just one case. I'll look for more and, if there's something to it, try to write about it.
    • Alternative "Narrow Networks"
      IBJ has already reported that there are two providers in Marion County of health insurance on the Marketplace - Anthem and MDWise. They have different providers. If your doctor is in one but not the other and that is important to you, you can keep your doctor. Or, if earning a subsidy is not important or available to you, you can go off-Marketplace and buy "Qualified Health Plans" (that meet the same federal standards that are protective of the public) from Humana and perhaps others. The uninformed might conclude from this article that there is no choice. There is choice.
    • Depends on the Regulator
      You are correct in assuming that residents of states with administrations fully engaged in implementing the ACA find themselves in a better place than Hoosiers do. For example, in Washington, the commissioner turned down some issuers because their network was too narrow. The ACA charges insurance regulators with assuring that networks are "adequate." There's not alot of detail provided around that requirement, but , as is the case with other regulatory activities -- like regulation of premium rates -- some commissioners are (and will be) more conscientious than others about assuring the networks in their states are adequate. It will be interesting to see if consumers remain loyal to their insurer or to their providers, i.e., drop Anthem for MDwise.
    • ACA
      One benefit of the ACA was to shake us out of the status quo. Simply look at the North side and you can see the local healthcare providers had a overbuilt vision and costly vision. The mantra of the US has the best healthcare system is and has not been so for decades.

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