“The notion that a major insurer would exclude us as from a major insurance product like this is unprecedented,” said Dr. Sandy Melzer, senior vice president and chief strategy officer with Seattle Children's. “It is a wake-up call to families.”
Experts say conflicts are heating up nationally between insurers vying to sell affordable plans in the exchanges and healthcare providers with high overhead costs, including children's hospitals, academic medical centers and safety-net facilities with large Medicaid and Medicare populations. Several observers declined to identify other markets where behind-the-scenes negotiating may be breaking down.
Mark Wietecha, president and CEO of the Children's Hospital Association, said Seattle Children's was probably the “first out of the box” with their litigation.
“I think we're going to see more of it, and I don't think it will be unique to pediatrics,” Wietecha said. “In some of the other states, it is still early days. Each state is different. This is something that we have a lot of buzz around on the pediatric side and the adult academic side.”
The conflict exposes a tension embedded in the structure of the insurance exchanges mandated under the Patient Protection and Affordable Care Act, pitting the goal of providing meaningful coverage against the need to keep the premiums low enough that millions of people will be able and willing to pay them.
HHS mandated that insurance plans sold through the exchanges provide “adequate” networks for care, including providers that treat large shares of under-served populations. The federal list of 17,000 “essential community providers” includes more than a dozen children's hospitals, including Seattle Children's.
But the rule only requires plans on the exchanges to include 10% of the nearby essential community providers.
Experts will be watching the outcome of the Seattle Children's litigation closely, because it could become the first lawsuit to interpret the related federal requirement that networks in exchange plans have a sufficient number and variety of providers to ensure that services are “accessible without unreasonable delay” and enrollees have adequate choice within each type of provider.
“If you're trying to sell a product on an exchange, and the product is supposedly providing the necessary services, you'd need to contract with a high-end children's hospital,” said Lisa Martin, a senior vice president with Moody's Investors Service who penned a major report on children's hospitals last year. “I think it's going to be very difficult to exclude children's hospitals from the networks.”