Patients locked into narrow networks could see prohibitively higher co-pays and deductibles when they seek care outside of the networks, which is typical of most managed-care plans. Their use in exchange-offered plans is expected to accelerate, though, because regulations in the Patient Protection and Affordable Care Act limit insurers' ability to restrict services, increase enrollees' cost sharing or spread costs to people with pre-existing conditions or the near-old, health policy analysts say.
The use of a limited group of providers with whom insurers have negotiated reduced rates is among the few ways plans have to lower their costs. The law's exchange rules “make it in the interest of health plans to keep their networks tight,” said Ellen Pryga, director of policy for the American Hospital Association.
Commercial insurers and for-profit hospitals have indicated in investor calls in recent months that they are negotiating narrow network arrangements for plans that will be offered on the new exchanges.
While the exchange network adequacy rules include a provision that essential community providers (ECPs) be included in any plan with a limited network, officials at large public safety net hospitals are worried those safeguards may have been undermined by recent guidance issued by the Center for Consumer Information and Insurance Oversight at the CMS. On April 5, the office wrote insurers considering plans for the 33 federally operated exchanges that they could meet the ECP requirement by adding a single hospital of any type to their networks.
“There are a lot of hospitals that qualify under the federal definition of ECP, and not all of them are true safety net hospitals,” said Xiaoyi Huang, assistant vice president for policy at the National Association of Public Hospitals and Health Systems. Huang's group is writing the CMS about its concerns, but the use of guidance instead of a formal rule means the CMS is not required to respond.
Although the full impact of large-scale use of tight provider networks in exchange plans may not be known for several years, public hospitals and academic medical centers are concerned it could reduce their number of insured patients, raise uncompensated care costs and boost their bad debt. Patients in narrow network plans who seek care at out-of-network safety net hospitals will be more likely to fail to pay the high patient copays that federal rules allow in such cases.
That leaves the hospitals to absorb those costs. “There's not going to be out-of-network coverage except for very limited services,” said Sara Rosenbaum, a professor of health policy at George Washington University.
Such uncompensated care costs have traditionally been offset by federal and state assistance for hospitals with high numbers of uninsured patients—so-called disproportionate share payments. But governments at all levels are planning to cut back on such assistance due to the expanded coverage provided by the federal healthcare overhaul.
Meanwhile, hospitals that have aggressively expanded to develop their own networks of providers and can offer insurers a one-stop narrow network are likely to be big winners from the narrow network plans. They are expected to gain wide acceptance in exchange plans.
“They stand a better chance because what the plan wants to do is buy a specialty package in a box,” Rosenbaum said. “It's cheaper and you only have to shop once.”
Follow Rich Daly on Twitter: @MHrdaly