“I think it's probably going to end up in several arbitrations across the country,” she said.
State hospital associations do not dispute that the terms of some contracts would allow for payment reductions. “But what we've heard overwhelmingly is that the plans are not looking at the contracts,” said Sarah Lechner, general counsel for the New Jersey Hospital Association.
She added that at least 10 to 15 providers in the state have run into these issues.
In Washington state, the contract disputes have reached the state's Office of the Insurance Commissioner, which is looking into the matter, said Casey Moriarty, a healthcare attorney at Ogden Murphy Wallace.
Hayes-Kibreab said the issue is most significant in states where Medicare Advantage plans have the greatest penetration, such as Florida (34% of beneficiaries) and Arizona (37%). She added that physician groups and post-acute care providers appear to be facing the same issue as hospitals.
For their part, insurers claim the sequestration cuts along with the rate cuts and taxes under the healthcare reform law may force them to scale back their popular Medicare Advantage offerings and benefits.
“The depth of the underfunding of these benefits to seniors is causing us to exit certain market areas, reduce the number of plan offerings and reduce benefits in the majority of the local markets we serve,” UnitedHealth President and CEO Stephen Hemsley said on a second-quarter earnings call.
Aetna said in a 10-Q filing that the reduction to 2014 premiums represents “a meaningful revenue and operating results challenge.”
For the first time since 2011, health insurers will offer fewer Medicare Advantage plans in 2014 than they did the previous year. An analysis from Avalere Health found that the number of plans on offer will decline 5.3% to 2,522, from 2,664.
But the pullback is uneven, being most pronounced in the South and Midwest where about 80% of counties will have fewer plan options. In addition, insurers are replacing broader-network PPOs with HMOs.
“Beneficiaries are in a bit of a panic,” said Margaret Murphy, associate director at the Center for Medicare Advocacy. “That's causing a big disruption for people.”
Still, Murphy argues that insurers' pullback in Medicare Advantage has less do with rate cuts and ACA-related provisions than with their growing interest in the new insurance exchange market created by the ACA. Covering elderly people with chronic conditions is much more difficult and expensive than covering healthy young people.
“There are a lot of low-hanging fruits with the Affordable Care Act creating markets for people who are relatively healthy,” she said.
Follow Beth Kutscher on Twitter: @MHbkutscher