When open enrollment began on the nation’s healthcare exchanges on November 1, many people who bought insurance for 2015 found that the 2016 plans they had to choose from have narrower networks of hospitals.
In addition, premiums might be significantly higher. Insurers have asked the federal government for permission to increase premiums by as much as 40 percent or more.
All of this is happening because health insurers say that people who have signed up for coverage under the Affordable Care Act have been sicker than expected.
“You’re seeing the health plans take on more risk than they actually anticipated,” Barbara Otto said, who heads the Chicago-based non-profit Health and Disability Advocates, which works to educate people about their health insurance choices on the exchange.
“Anecdotally, we’re hearing a lot from different health plans that they are seeing large populations of people with chronic conditions enrolling,” Otto said, adding that a lot of these new patients had not had health insurance for years. In Illinois, most patients signed up with a silver tier PPO plan offered by Blue Cross and Blue Shield of Illinois, said Otto.
A PPO, preferred provider organization, is an insurance plan that offers patients relative freedom to choose doctors and hospitals. Patients pay more of the costs for providers outside of the PPO’s network, and less for those inside the network. PPOs are less restrictive than HMOs, health maintenance organizations.
Blue Cross and Blue Shield of Illinois’ PPO plan offered a cheap price (with subsidies) and a large network of hospitals, including prestigious academic medical centers.
While this was great for patients, Blue Cross and Blue Shield of Illinois said the plan was the highest in cost for them. So, the insurer decided to no longer offer it on the insurance exchange for 2016. Instead, it is offering to renew patients in an alternative PPO with a narrower network. The insurer would not comment for this story.
Otto said she fears a lot of confusion during the upcoming enrollment period. “People are going to go into the marketplace thinking that they’re purchasing this broader PPO network, when in fact what they’re getting is a very narrow product,” Otto said. Health insurance educators will have to do a lot of heavy lifting, she said.
“The phenomenon of narrow networks is not an Illinois, or Chicago-based phenomenon,” said Larry Van Horn, associate professor of management and the executive director of health affairs at Vanderbilt University, who researches healthcare management and economics.
Insurers are trying to control costs by funneling more patients to fewer hospitals, Van Horn said. “To negotiate better rates, they’ve got to be able to focus more patients into a particular facility, such that they have more bargaining power at the negotiation table.”
And there are advantages to this, Van Horn said. “In return for trading off choice, patients, subscribers get lower prices,” he said. Patients who are willing or able to pay more will have access to more choices.
But, many patients may not realize exactly what they are giving up, said Robert Wachter, interim chair of the Department of Medicine at the University of California in San Francisco. In their efforts to control costs and premiums by narrowing networks, both Wachter and Van Horn said insurers are preferring cheaper community hospitals, and increasingly eschewing big, expensive academic research hospitals.
While that may be fine for most patients, because community hospitals can take care of the majority of patients’ needs, problems arise when patients need more advanced care than community hospitals are able to provide, Wachter said. Care such as an organ transplant.
“I hear from patients that, ‘well, I joined a plan, and I didn’t really read the fine print, and now I have something serious and I’d love to see one of your specialists, and I know that I can’t get there. Is there any way to work around the system?,'” Wachter said.
Major medical centers are more expensive, he said, they have to do more. “Some of it is that we’ve got to create an environment that is ready to do a heart transplant at a moment’s notice or take care of a patient with a massive trauma. Those sort of things cost money to create capacity that you may not be using every minute,” Wachter said.
As more patients are syphoned away from major medical centers by insurance plans looking to control costs, Wachter said a threat is emerging for these academic hospitals and their ability to survive. To combat the trend, Wachter said many large medical centers are taking on more doctors and expanding their own networks, so that they too have greater leverage in negotiating with insurance companies.
In the meantime, Barbara Otto is worried about next year’s insurance plans in Illinois. Yes, there may be plans with premiums that are still affordable enough for most patients, especially those needing subsidies, but at what cost, she wonders.
“We may be creating different tiers of healthcare, based on what you can pay,” Otto said. “Which in a way defeats the whole idea, which is opening up access to care for everyone.”