In a bid to halt rising health care costs, local insurance carriers are pushing lower-cost plans with fewer choices of physicians and hospitals.
The tradeoff: In exchange for lower overall health care costs, some Americans may have to switch physicians or end up paying higher out-of-network rates to keep their longtime family doctor.
The trend isn’t new. But it has been accelerated by the Affordable Care Act and the creation of Accountable Care Organizations, a new kind of health care model, says Gary Shorb, president and CEO of Methodist Le Bonheur Healthcare.
“It results in a lot of thinking about how we work with health plans and how we configure our different contracts,” Shorb said.
Already, many insurance carriers have purged the most expensive physicians and hospitals from their in-network provider ranks.
Insurance companies control costs by negotiating to pay hospitals and physicians lower reimbursement rates in exchange for creating limited provider choices. While physicians and hospitals receive less money for each service, the narrower networks drive more patient volume to in-network providers.
“If the insurance companies want to send consumers to really good places – then it is fine,” says Dr. David Mirvis, a professor with the departments of preventive medicine and internal medicine at The University of Tennessee Health Science Center. “The problem is that if not-so-good players come into the market and undercut the prices, then insurance carriers have to decide between quality and pricing.”
Historically, providers have had more pull than insurance companies and consumers in setting health care prices, said Mirvis, who also is a senior research fellow in the Methodist Le Bonheur Center for Health Care Economics at The University of Memphis. But by restricting networks, payers gain more bargaining power.
That tug-of-war between payers and providers has forced consolidation in many larger markets – something that is unlikely to happen in Memphis, Mirvis said.
That’s because the Memphis market is already very consolidated and there are a handful of local players that provide care for the region.
In Tennessee, the rates for plans that will be sold this fall on the state’s health insurance exchange haven’t yet been released. But plans that will be sold on California’s state-run exchange are cheaper than expected, but with fewer choices of physicians and providers.
Consumers who want UCLA Medical Center may only have one carrier choice: Anthem Blue Cross, the Los Angeles Times reported. Likewise, consumers who purchase Blue Shield of California plans will have access to about 36 percent of the carrier’s statewide physician network.
West Tennessee residents who purchase insurance coverage through Community Health Alliance on the state’s exchange this fall will be directed to providers at Baptist Memorial Health Care facilities.
The Knoxville-based insurance carrier was created with a $73 million federal loan in August 2012 to provide competition to other for-profit insurance carriers.
The exclusive agreement could be a boon for the Memphis-based Baptist system, which operates 14 hospitals across West Tennessee, North Mississippi and eastern Arkansas. Locally, many insurance carriers already market lower-cost plans with fewer physician and hospital choices to employers.
Cigna Corp., which provides coverage for a number of employers in the area, including FedEx Corp., the city of Memphis, and Shelby County employees’ plans, offers some plans that exclude Baptist Memorial Health Care Corp. hospitals and physicians, but include Methodist-affiliated providers.
The carrier’s plans may also soon exclude Saint Francis-affiliated providers and hospitals.
A Cigna spokeswoman confirmed Tenet Healthcare Corp., the parent of Saint Francis, and Cigna can’t agree on a new contract. The current contract ends Sept. 5.
“We are willing to continue negotiations and would like for Saint Francis to remain part of our network. However, we have an obligation to protect the interests of our clients and customers and ensure that they have access to high-quality doctors and hospitals at a reasonable cost,” Cigna said in a prepared statement.
Mirvis says the shifting market dynamics driven by the Affordable Care Act are putting pressure on both insurance carriers and providers.
“Everyone is going to get squeezed in terms of what is going to be expected of them in exchange for less money,” he said. “This is market reform at multiple levels, and it changes the way people are paid – and you have to react to that with constraints … especially when you have patients who expect certain things.”
Shorb says he thinks the move to narrower networks isn’t just about fewer choices for consumers. It’s about a move to a model of care that will create financial incentives for large managed groups that include primary care doctors, specialists, social workers, pharmacists and nurses to work together to manage a patient’s overall health.
The way for a company to make sure it is delivering care efficiently is to make sure it has a network of closely aligned physicians, he added.
While the creation of accountable care organizations like the one Shorb described is in its infancy, many experts think that’s where health care is headed. Accountable care organizations are reimbursed one lump sum to manage a group of patients, rather than billing individually for each service. If they are successful in keeping patients healthy, they make a profit.
“What’s going to matter is where that extra money goes,” Mirvis said. “Does it reduce premiums and improve overall care?”