By JULIE APPLEBY KHN Staff Writer— It’s back to the future for insurers, which plan to sharply limit the choice of doctors and hospitals in some policies marketed to consumers under the health care law, starting next fall.
Such plans, similar to the HMOs of old, fell into disfavor with consumers in the 1980s and 1990s, when they rebelled against a lack of choice.
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But limited network plans — which have begun a comeback among employers looking to slow rising premiums — are expected to play a prominent role in new online health care insurance markets, called exchanges, where individuals and small businesses will shop for coverage starting Oct. 1. That trend worries consumer advocates, who fear skimpy networks could translate into inadequate care or big bills for those who develop complicated health problems.
Because such policies can offer lower premiums, insurers are betting they will appeal to some consumers, especially younger and healthier people who might see little need for more expensive policies.
Insurers, who are currently designing their plans for next fall, “will start with as tight a network control as they can,” says Ana Gupte, a managed care analyst with Sanford Bernstein.
Health Care insurance plans may also benefit from offering such policies because they are less attractive to those with medical problems, who can no longer be turned away beginning in January 2014.
“Plans will basically say they can minimize their risk by creating narrow networks,” says John Weis, president of Quest Analytics, an Appleton, Wis., firm that analyzes provider networks for insurers.
State or federal regulators, who must review the plans sold in the online health insurance markets, are unlikely to permit them to exclude an entire class of doctors, such as cancer or diabetes specialists. But there might be more subtle ways to discourage consumers with medical problems.
“Narrow networks may be more than adequate 90% of the time,” Finan says, but are “not well-suited to deal with complicated medical conditions and chronic diseases.”
That’s because there may be few or no specialists available for certain complex conditions, so patients may have to seek care outside of the networks.
If the policy doesn’t cover non-network care, they may end up footing the bill themselves. Even if policies allow for outside the network coverage, patients can incur large copays or other costs.
“Your (financial) exposure could be high,” Finan says.
The federal health care law requires the policies to include a standard set of essential benefits, from emergency room and hospital care to prescription drugs, but the law is less prescriptive about the size of the policies’ networks of participating doctors and hospitals.
In March, the Obama administration issued rules stating that health care insurers must “maintain a network of a sufficient number and type of providers, including providers that specialize in mental health and substance abuse, to assure that all services will be available without unreasonable delay.”
That fell short of the specific standards sought by some consumer advocates, but pleased other groups that say insurers should have broad discretion to shape their networks to meet regional needs.
The administration noted, “nothing in the final rule limits an exchange’s ability to establish more rigorous standards.”
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Insurers contend that by limiting network size, they can offer health care insurance plans with higher quality or more efficient doctors and hospitals, which might slow spending or improve care.
Networks are already part of most health plans. For doctors and hospitals, joining a network brings in business. In exchange, they agree to negotiate their prices with insurers.
Driven by consumer and employer demand for lower-cost plans, insurers are already rolling out narrow network policies that have shaved premiums 10% or more. A recent survey by benefit firm Mercer found that 23% of large employers offered such plans this year, usually among a choice of plans, up from 14% in 2011.
In Massachusetts, insurer Harvard Pilgrim launched its Focus Network in April, touting 10% lower premiums. While it includes 50 hospitals and 16,000 physicians, it excludes some of the state’s highest-cost systems.
In California, Blue Shield has a number of SaveNet HMO plans that contract with select doctor and hospital groups, creating networks averaging a little more than half the size of its standard ones. Next year, for example, one serving Marin and Sonoma counties will offer a network of about 100 primary care doctors and 325 specialists.
Still, narrow network plans are a hard sell to employers, particularly the large ones, which don’t want to hear gripes from workers about limited choice of doctors simply to save 10% on premium costs.
But small businesses and individuals buying their own coverage in the online markets might regard that tradeoff differently.
“If my doctor is in the [narrow] network and cheaper, it might work,” says Wall Street analyst Carl McDonald at Citi Research, a division of Citigroup Global Markets.