Narrow networks: Get used to it

Narrow but workable

Narrow but workable

Many health plans unveiled “narrow network” plans recently as part of the Affordable Care Act. These plans cover a limited number of doctors, hospitals and other providers and often pay nothing for out-of-network coverage. Predictably, some members are upset as documented today by Kaiser Health News (Limitations of New Health Plans Rankle Some Enrollees.)  Some consumers are upset that they can’t see specific doctors who they may have seen in the past and that the list of available providers isn’t terribly long.

Insurance commissioners and lawmakers are hearing complaints and some are considering taking action. And while it definitely makes sense for regulators to take an interest in network adequacy and to prevent abuses, in my view narrow networks have become a crucial part of healthcare affordability and need to be maintained.

Here’s why they’ve become prevalent: The Affordable Care Act prevents health plans from using many of their traditional tools for limiting costs. They can’t reject sick or high-risk patients, can’t charge them more, can’t cap annual or lifetime benefits, and have to provide a set of proscribed services. At the same time, the plans are subjected to apples-to-apples comparisons on health insurance exchanges by price-sensitive buyers. The result is that plans take the main remaining step they can to be control costs: limiting their networks to providers willing to accept lower reimbursement rates.

Most shoppers care mainly about price so this is a very sensible approach for the health plans. And for many customers it’s a way to afford insurance that provides a wide array of benefits. In some markets (including Massachusetts) narrow network products that exclude the highest priced, largest healthcare systems provide very substantial discounts while still delivering high quality providers.

Narrow networks are becoming increasingly important. In 2010, before the Affordable Care Act, I wrote Narrow networks. Nice idea but no panacea. I listed six reasons why such networks were having a limited impact. Some of these factors are still present, but others are less prominent. For example, the development of integrated delivery networks mean that health plans can contract with these larger entities and get essentially all the providers they need, the emergence of risk-sharing through ACOs and similar arrangements aligns incentives, and in general there is more price sensitivity. At least a few provider organizations are now positioning themselves as value players, ready to address an emerging market segment.

 

photo credit: coolmonfrere via photopin cc

By healthcare business consultant David E. Williams of the Health Business Group

ACA rollout hits some Massachusetts businesses harder than expected

Like many, I’ve been surprised that the rollout of the Affordable Care Act has had such an impact on Massachusetts. After all we already had near universal coverage, an exchange/marketplace, lots of mandates, guaranteed issue and community rating. Obamacare is based on Romneycare. But somehow Massachusetts screwed up the rollout of the Obamacare exchange, which is costing $100 million to fix, and at least some Massachusetts small businesses are getting hit with big rate hikes as they renew.

One small business I know got hit with a 29 percent premium jump, almost all due to the ACA. Here’s how a Blue Cross actuary explained it:

  • Blue Cross has alway developed its rates for the merged individual/small group market by rating each member based on age and location. Industry and company size have also factored in
  • However, prior to 2014 Blue Cross only counted the first 2 kids plus adults when doing the rating
  • The ACA mandates a similar approach, but now Blue Cross has to count the first 3 kids in the family. In addition, if a son or daughter aged 21-26 remains on the plan, that individual is counted as an adult along with up to 3 kids
  • For this particular business with the 29 percent jump, the shift in the counting of number of kids boosted the premium by about 25 percent
  • The other 4 percent was mostly related to aging of the members plus the inclusion of pediatric dental benefits in the medical benefit, again as required under the ACA
  • The ACA requires Blue Cross to phase out its reliance on company size and industry rating factors over time. That effect was basically neutral for this customer, whose premium rose about 3 percent based on the phase out of the industry factor and went down 2.5 percent based on phasing out of the company size factor

The silver lining, if any? There shouldn’t be any serious changes in premium for next year’s renewal.

I’d heard about similar premium increases for other small businesses and non-profit organizations, including those that I don’t think are facing the family size issue. But maybe I’ve just heard from those who’ve been hit hard and others are not seeing increases.

Is your Massachussetts small business healthcare premium skyrocketing next year? Is it staying flat? I’d love to hear from you in the comments or via Twitter @HealthBizBlog.

By healthcare business consultant David E. Williams of the Health Business Group

 

Medicaid: Program for the poor should not impoverish doctors and hospitals

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Medicaid beneficiaries deserve the same access to healthcare services and products as people with commercial insurance or Medicare. But since Medicaid pays doctors and hospitals 27 to 65 percent less than commercial health plans (according to a new GAO report), it makes it awfully difficult for providers to be payer agnostic. Sure enough, we see even supposedly mission-driven non-profit healthcare systems looking to maximize their share of the commercial population by catering to that group.

That’s a real public policy problem as the proportion of patients with Medicaid increases, and it presents providers with an unreasonable dilemma.  In many states, doctors or hospitals that take care of a high proportion of Medicaid patients will find themselves in financial distress. That’s not fair to them or the Medicaid recipients. Frankly it’s also unfair to the commercial customers who may be overpaying to compensate for Medicaid underpayments.

Compare Medicaid with the Supplemental Nutrition Assistance Program (SNAP), aka Food Stamps. SNAP recipients don’t bankrupt supermarkets. That’s because the government pays the same price for groceries as any other customer. The SNAP program doesn’t demand that the grocery store sell products below cost, nor should it. SNAP recipients have to be savvy about how they use their benefit, seeking out high value products and retailers to stretch their dollar.

Realistically we won’t see the disparity between Medicaid and commercial payment rates erased any time soon. It would be just too expensive. But there are steps that can and should be taken:

  • Narrow the gap over time from the current 27 to 65 percent to something more like 10 to 15 percent
  • Introduce more progressive payment mechanisms –like Medicaid Accountable Care Organizations– that provide health systems with incentives to contain costs and improve quality. Healthcare systems that figure out how to help Medicaid members become healthier for a lower cost will prosper –analogous to what Walmart does with SNAP payments
  • Provide incentives for Medicaid beneficiaries to seek lower cost, higher quality care. Let’s not be paternalistic and assume that people on Medicaid aren’t capable of identifying high quality, low cost services.. I’ll venture to say that many lower income Americans are savvier shoppers than average consumers, if only due to necessity

The GAO report should be a wakeup call. It’s time to do something about these disparities beyond simply shrugging our shoulders.

photo credit: nffcnnr via photopin cc

By healthcare business consultant David E. Williams of the Health Business Group

Health Business TV: Cash for specialists, eVisits again, nursing shortage mythology

https://www.youtube.com/edit?o=U&video_id=SqEf7ry112cIn this fifth episode of Health Business TV, I discuss my interview with HelloMD about cash payments to specialists, the long and slow evolution of eVisits, more on the nursing shortage myth, the United Independent Party in Massachusetts, and an update on the proposed 29% health insurance premium hike for our business..

Please subscribe to the YouTube channel and tell your friends!

 

By healthcare business consultant David E. Williams of the Health Business Group

 

Health Wonk Review is up at Wing of Zock

The latest Health Wonk Review blog carnival is up at Wing of Zock (incidentally one of my favorite blog names!). You can catch the latest on the Affordable Care Act, health care in India, hospital readmissions, and cancer treatment. Have a look.

Ending one party rule in Massachusetts: United Independent Party

The Boston Globe published my letter to the editor today (A third way for governor). This blog post provides more detail.

Massachusetts is the cradle of the American Revolution, and people here enjoy vigorous political debate. We generally have healthy competition between Democrats and Republicans for Governor –including this year when both parties are fielding credible candidates. (I interviewed all nine candidates about healthcare policy earlier this year.) Sometimes the race for US Senate is competitive, too. But beyond that it’s pretty much single party rule by the Democrats.

That doesn’t sound like a prescription for a healthy democracy, and in fact it isn’t.

From time to time the Boston Globe and other publications draw attention to this sad state of affairs, including in Monday’s paper (Few GOP foes for Mass. delegation), where the Globe pointed out that six of nine US House races will be uncontested this November. It’s even worse in the state legislature, where just one third of races are contested.

I respect what one Congressman has to say about it:

“Look it, I was fully prepared for a campaign. And I expected one. It just didn’t happen,” said Representative Jim McGovern, a Democrat from Worcester who is running unopposed in both the primary and general elections. “For the sake of our democracy, it’s not a bad thing to be challenged. . . . But my job is not to find myself an opponent. That’s somebody else’s job.”

The usual conclusion drawn by such articles, including this one, is that Republicans need to step up and get organized. But they’ve failed to do so even when they’ve had strong leaders such as Bill Weld, Mitt Romney, Charlie Baker, and Scott Brown.

Part of the problem is clearly a lack of leadership and discipline to build the party at the grassroots level. But there’s more to it than that. A fatal flaw is that the national Republican party has moved too far to the right, and has taken positions on social and civic issues that put it outside the mainstream of Massachusetts voters. For example, marriage equality is a settled issue here, people understand the value that immigrants bring to the economy and culture, RomneyCare is broadly popular, and there is a belief that government can work. Even those who don’t feel well served by Democrats think twice before voting in someone who identifies with the national GOP on issues like this.

Believe it or not, most voters in Massachusetts are independents. As of late 2012 there were close to 2.3 million people registered as independents compared with fewer than 1.6 million Democrats and 0.5 million Republicans.

This is why I’m excited about the United Independent Party, which describes itself as follows:

Founded in 2012 by Evan Falchuk and enthusiastic supporters from around the state, the United Independent Party (UIP) is a bold new movement on the Massachusetts political map. It is committed to changing the conversation from “small government versus big government” to one focused on greater accountability to voters, stronger protection of social freedoms, and more innovative, fiscally sane solutions that improve the day-to-day lives of individuals, families and communities.

Laws in Massachusetts make it hard for a new party to establish itself. There are limits on fundraising and it’s hard to get candidates on the ballot. But Evan Falchuk easily generated enough signatures to get on the ballot for Governor and if he wins at least 3 percent of the vote then the UIP will qualify as an official party and be able to more easily get its candidates on the ballot. It intends to recruit candidates for a wide array of offices and help express the will of the people in Massachusetts. The demand is there: a 2013 UIP poll revealed that most voters favor an independent party like the UIP, committed to fiscal moderation and the protection of civil liberties.

If it sounds interesting to you, have a look at the Falchuk for Governor website and consider changing your voter registration to United Independent Party.

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By healthcare business consultant David E. Williams of the Health Business Group