Featured Health Business Daily Story, Oct. 25, 2013
Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.
From a pediatric hospital in Washington state to rural hospitals in New England, providers are feeling stung by their exclusion in the rising number of narrow-network plans being offered in health insurance exchanges for 2014. For the most part, insurers, hoping that limited networks help lower premiums to attract cost-conscious consumers, seem to be gaining regulatory approval. In response, providers including Seattle Children’s Hospital have filed recent suits against state regulators; others are waiting to see how it all plays out in the market.
In exchanges, insurers “can’t compete on benefits and cost sharing, so you compete on your price and your network and quality of service,” says law professor Timothy Jost of Washington & Lee University. In some cases, expensive providers including children’s hospitals, academic medical centers and facilities with large Medicaid and Medicare populations may be excluded from networks.
WellPoint, Inc.’s Anthem Blue Cross and Blue Shield unit is using a narrow-network strategy for exchange plans in Maine and New Hampshire, and mostly getting the go-ahead from state regulators. “The focused network concept is not unique to either state and is a strategy that providers and carriers have employed in many other states,” says Anthem spokesperson Chris Dugan. Anthem has about 17,500 individual members in Maine and 30,000 in New Hampshire.
“In both states, providers in our select networks have offered discounts which enabled us to offer premiums that are considerably less (12% lower in Maine, 25% lower in New Hampshire) than they would have been without the network,” Dugan tells HPW. “This strategy is one lever we can pull as part of our ongoing efforts to control costs.”
Attorney Jack Rovner, a principal in The Health Law Consultancy in Chicago, successfully defended Blue Cross and Blue Shield of Indiana’s network in the 1980s when the insurer decided not to include every hospital and physician in the state in a PPO.
He says the current situation is reminiscent. “The court found nothing wrong with selective provider contracting,” he recalls.
“Assuming exchanges do work and people start signing up, we are looking to a return to the ’80s. And we’ll probably see rising criticism of narrow networks by providers…and a lot of lobbying to expand ‘any willing provider’ statutes,” Rovner says. He predicts there “could be a lot of litigation that will shake out over the next five to seven years.”
Seattle Children’s Hospital claims in its suit filed Oct. 4 that most Washington state-approved exchange plans are excluding it, along with its specialty services such as acute cancer care that aren’t available elsewhere in the state. Rovner responds that insurers “could just make those services available at a discount in-network and put other services out-of-network.”
But Bill DeMarco, president and CEO of DeMarco & Associates, Inc., a health care consulting firm working with hospitals across the U.S., worries about consistency. He tells HPW he is asking insurers what happens if a children’s or specialty hospital isn’t part of a narrow-network exchange product. “I get the response, ‘If you get a referral…the plan will cover it.’ But the plan may well just deny it, saying you don’t really need [the service]…and it’s likely to vary.”
To complicate matters, Jost, Rovner and others note that the health reform statute and implementing regulations only broadly define network adequacy and plans’ need to offer “essential community providers.” That basically leaves the determination of network adequacy up to the states. And not only do states’ standards differ, but they also are evolving.
Thus, the Seattle Children’s Hospital lawsuit could help define the scope of the federal network-adequacy requirement for plans, Jost says, “but every case, every network, every hospital is going to be different.” Rovner adds that creating plans with limited networks in states with “any willing provider” laws is challenging at best for insurers, “unless you cut a deal with providers” or offer competing narrow networks.
Maine is not an “any willing provider” state, so “insurers have discretion to engage in selective contracting and to offer ‘narrow network’ and/or ‘closed plan’ policies, as long as consumers throughout the service area have adequate access to all types of providers,” says Maine Dept. of Insurance spokesperson Doug Dunbar. He says the state’s standards are different for new and renewal business because existing customers have guaranteed-renewal rights; thus, existing customers enrolled in a broad-network plan that provides an out-of-network option have the right to keep that coverage.
In July, Maine Insurance Superintendent Eric Cioppa approved Anthem’s narrow-network products for the state’s exchange. This includes two new Anthem plans for individuals and small-employer groups of fewer than 50 employees that began enrollment Oct. 1 for coverage starting Jan. 1, 2014: “Guided Access HMO” and “Guided Access POS” (i.e., point-of-service) plans.
Yet, Cioppa on Oct. 4 denied Anthem’s request to discontinue certain individual health plans and put those members into a narrow-network HMO outside the exchange. His denial affects members of Anthem’s non-grandfathered plans in 10 southern and western Maine counties, where excluded hospitals strongly protested the new limited-network exchange product formed by Anthem and MaineHealth, parent company of Maine Medical Center in Portland. In April, Anthem and MaineHealth launched a commercial accountable care organization (ACO) together.
Under Cioppa’s ruling, Anthem may move non-grandfathered policyholders in six counties in northern Maine into a broad network POS plan, and must shift such members in southern Maine to plans that retain the existing broad network and don’t totally exclude benefits for out-of-network services. Anthem submitted a compliance filing Oct. 16, asking for rapid state approval of its compliance plan since 2014 open enrollment already has begun. (Non-grandfathered members bought policies between March 2010 and July 2012, when Anthem stopped selling it.)
Dunbar says the state used a “reasonable access” standard in the first ruling, and used a “best interests of the consumer” standard in the second ruling. He further notes that Maine law no longer contains specific time-and-distance requirements, replaced by 2011 legislation with a requirement that each carrier adopt and adhere to reasonable time-and-distance standards.
That means providers must be “geographically accessible,” Dunbar says, explaining the issue was considered in Cioppa’s July decision. In support of its narrow-network exchange plans, Anthem said it aimed toward the industry standard of primary care physicians within 30 minutes of every ZIP code, and hospitals and high-volume specialists within 60 minutes of every ZIP code.
“Anthem used the former regulatory standards as a benchmark, rather than as a bright line, and the superintendent approved this approach, allowing those to serve as a safe harbor while also allowing reasonable case-by-case exceptions where necessary,” Dunbar tells HPW. “Other carriers, however, may propose a different approach to geographical access, subject to the superintendent’s approval.”
Spokesperson Chuck Gill of Central Maine Healthcare, a system whose three hospitals are excluded from Anthem/MaineHealth’s narrow-network exchange product, has asserted that the product is the result of a “backroom deal” that will hurt consumers’ access to local doctors and hospitals in southern and western Maine. Of Maine’s 38 hospitals, he notes that only six — including his system’s Central Maine Medical Center in Lewiston, Bridgton Hospital and Rumford Hospital — are out, and they all compete with MaineHealth’s nine member hospitals and three affiliated hospitals in southern and western Maine.
Similarly, in New Hampshire, state regulators recently recommended CMS’s approval, subsequently given, on Anthem’s narrow-network products for the state’s federally facilitated exchange. Initially, Anthem included 14 of 26 acute care hospitals statewide, state officials say, but later added two hospitals in the northernmost counties near the Canadian border due to access concerns, mainly over keeping obstetrical services within a reasonable distance.
Anthem is the only issuer in New Hampshire’s exchange for 2014, “and will offer 11 products, all based on the same network,” says New Hampshire Insurance Department spokesperson Alexander Feldvebel. “We have a state regulation that specifies standards for network adequacy. It’s a time-and-distance type that says at least 90% of the membership must have access to hospitals within 45 miles or 60 minutes’ travel time,” he adds. Most carriers use Optum’s GeoAccess software program to generate reports for regulators to review, he notes.
Find Cioppa’s ruling at http://tinyurl.com/nvrx2xh.
© 2013 by Atlantic Information Services, Inc. All Rights Reserved.
The AIS E-Savings Club offers regular opportunities to buy AIS products and services at substantial savings. Click here to see the current specials — including a $30 discount on the all-new edition of Health Plan Facts, Trends and Data, a best-selling resource from the editors of Health Plan Week.