Indiana hasn’t seen big spikes in the price of health insurance sold on the Obamacare exchanges—because those prices started out 20 percent to 25 percent higher than the national average when the exchanges kicked off in 2014.
But there may be another factor at play. Few of Indiana’s health insurers started out using a “narrow network” of hospitals and doctors. Instead, most of them signed up as many doctors and hospitals as they could.
That’s what a recent study found when it compared all states based on the size of provider networks offered by health insurers selling policies on the Obamacare exchanges in 2014.
A narrow network is a key way health insurers can get cheaper prices, especially from hospitals. When Anthem Blue Cross and Blue Shield pitched central Indiana hospital systems on joining its narrow Obamacare exchange network, it asked for prices that were 10 percent lower than normal.
In 2014 in central Indiana, only Community Health Network and Eskenazi Health joined Anthem’s exchange network.
Anthem was the only health insurer (out of four) selling Obamacare policies in Indiana that year that used a limited network of doctors and hospitals. (Although, it should be noted, Anthem garnered more than two-thirds of the total enrollees in 2014.)
That 25-percent ratio ties Indiana for 11th place among the 50 states, according to the recent analysis by the Robert Wood Johnson Foundation and the Leonard Davis Institute of Health Economics at the University of Pennsylvania.
By contrast, Georgia, Florida, Oklahoma, California, Arizona and Texas had more than 70 percent of their Obamacare insurer’s offering narrow networks. To see the full list, go here.
Things have changed a lot since 2014. Indiana had nine insurers on the Obamacare exchanges this year and will have eight next year. Anthem’s market share has fallen to just below 50 percent.
Some new entrants in 2015 have touted their broad provider networks. UnitedHealthcare took that strategy and signed up more than 28,000 health plan members last year. MDwise Inc. used a broad network strategy in 2014 and 2015, claiming an impressive 28,000 members in 2014 but seeing that slip to 23,000 in 2015.
But other newcomers, such as IU Health Plans and CareSource, have pushed narrow network products. CareSource captured more than 34,000 members in its first year, second behind only Anthem’s 100,000.
Anthem, meanwhile, has decided to split the difference, adding St. Vincent Health hospital system to its exchange plans' network in the middle of this year. That makes me wonder if Anthem’s Indiana offering would even qualify as a narrow network plan under the study’s methodology.
I’m watching all this churn with interest because the concept of limiting choices of doctors and hospitals has never caught on in Indiana, even during the HMO go-go days of the 1980s and 1990s. And yet, as the study authors note, it’s one of the few tools insurers have left under the new rules of Obamacare, also known as the Affordable Care Act or ACA.
“In the new health insurance marketplaces, insurers have limited options for offering plans at different price points within a metal tier,” wrote the study’s authors, Dan Polsky and Janet Weiner, referring to Obamacare’s Bronze, Silver and Gold labels for the different levels of benefits it requires.
“ACA-mandated changes—such as community rating, standardized benefits, and removing limits on annual or lifetime benefits—mean that insurers must find other strategies for offering lower-cost plans,” Polsky and Weiner wrote. “Narrow provider networks have emerged as one of the only remaining pieces in the insurers’ cost-containment toolbox.”
(For those of you who aren’t health insurance wonks, Obamacare’s community rating rules require that insurance sold to small businesses and individuals can cost a 64-year-old adult no more than three times as much as a 21-year-old. Pre-Obamacare policies often charged the oldest adults five times more than the youngest. The result of that change is, on the whole, to raise premiums for all but the oldest customers.)
I’m also curious if narrow network plans catch on in the employer-sponsored insurance market. The main way that is likely to happen is through employers that join a private exchange.
Employers that use a private exchange would contribute money into an account on the exchange for each worker—more for those seeking family coverage and less for those seeking single coverage. This is called “defined contribution” health benefits, as opposed to the “defined benefit" that most employers now purchase for their workers.
Using a defined contribution strategy, employers could then increase that contribution by a set amount each year—effectively shifting the risk of fast-rising health insurance premiums onto workers.
Exchanges can ease the big fear employers have always had about limiting their employees’ choices of doctors and hospitals. That’s because they make it easier for employers to offer multiple plans. Not all of those plans will have every employees’ doctor in its network, but every employee can find at least one health plan with the doctor he or she wants.
Private exchanges haven’t caught on much here in Indiana—I still have yet to hear of an Indiana-based employer that has tried it and been willing to talk about it. But Anthem expects them to keep growing.
Anthem saw the number of health plan members it enrolled via private exchanges jump from 127,000 at the end of 2014 to 280,000 at the end of March. Anthem executives said most of those members are insured by large employers who are using an exchange operated by one of the large benefits consulting firms, such as Mercer, Gallagher and Aon Hewitt.
“While still a small piece of the overall book, we expect private exchange enrollment will continue to grow within our mix over time,” said Anthem CEO Joe Swedish. Anthem executives added that Obamacare’s Cadillac tax, which kicks in in 2018, could accelerate the switch to private exchanges, as employers try to keep their health plans from triggering that tax.
“We believe that there's probably an escalating interest in private exchanges,” Swedish added. “So, we're very mindful of that. I mean we're building our platform to adapt to that shift. And as we've consistently stated, we will be ready when that inflection point occurs. And there's, quite frankly, a very quickened pace toward private exchanges, which we believe will occur in the coming year or two.”
But those comments are about the national market. Whether Indiana will join in that trend significantly remains to be seen.
In the past, Indiana saw far less penetration of HMO health plans—which also feature restricted access to health care providers—than many other states did.
But so long as Hoosiers keep singing “Don’t Fence Me In,”—that tune by native son Cole Porter—they could keep paying more for health insurance.