The New York Times
July 17, 2010
Insurers Push Plans That Limit Choice of Doctor
By Reed Abelson
As the Obama administration begins to enact the new national health care law, the country's biggest insurers are promoting affordable plans with reduced premiums that require participants to use a narrower selection of doctors or hospitals.
The plans, being tested in places like San Diego, New York and Chicago, are likely to appeal especially to small businesses that already provide insurance to their employees, but are concerned about the ever-spiraling cost of coverage.
But large employers, as well, are starting to show some interest, and insurers and consultants expect that, over time, businesses of all sizes will gravitate toward these plans in an effort to cut costs.
The tradeoff, they say, is that more Americans will be asked to pay higher prices for the privilege of choosing or keeping their own doctors if they are outside the new networks. That could come as a surprise to many who remember the repeated assurances from President Obama and other officials that consumers would retain a variety of health-care choices.
But companies may be able to reduce their premiums by as much as 15 percent, the insurers say, by offering the more limited plans.
Many insurers also expect the plans to be popular with individuals and small businesses who will purchase coverage in the insurance exchanges, or marketplaces that are mandated under the new health care law and scheduled to take effect in 2014.
Prominent officials like Mr. Obama and Hillary Rodham Clinton learned to utter the word "choice" at every turn as advocates of overhauling the system.
But choice — or at least choice that will not cost you — is likely to be increasingly scarce as health insurers and employers scramble to find ways of keep premiums from becoming unaffordable. Aetna, Cigna, the UnitedHealth Group and WellPoint are all trying out plans with limited networks.
The size of these networks is typically much smaller than traditional plans. In New York, for example, Aetna offers a narrow-network plan that has about half the doctors and two-thirds of the hospitals the insurer typically offers. People enrolled in this plan are covered only if they go to a doctor or hospital within the network, but insurers are also experimenting with plans that allow a patient to see someone outside the network but pay much more than they would in a traditional plan offering out-of-network benefits.
The insurers are betting these plans will have widespread appeal in the insurance exchanges as individuals gravitate toward the least expensive options.
The new health care law offers some protection against plans offering overly restrictive networks, said Nancy-Ann DeParle, head of the office of health reform for the White House. Any plan sold in the exchanges will have to meet standards developed to make sure patients have enough choice of doctors and hospitals, she said.
How widespread these plans will become is anybody's guess, and some benefits consultants wonder if these plans represent any real solution to high medical costs. The narrow network, if it is based on the insurers' ability to demand low prices, may be "just another short-term fix," warned Barry Schilmeister, a consultant at Mercer.
But many insurers say they are still figuring out how to persuade people to choose these plans rather than force them to enroll. "What's not changed are the old techniques of black-belt managed care," said Mark T. Bertolini, Aetna's president. "We have to create the same kind of model without the 'Mother, may I.' What we want is the 'Mother, should I.' "
Comment: The managed care revolution brought us restricted networks of physicians, hospitals and other health care services. These restrictions, which limited patients' choices of their health care professionals and facilities, did produce a one-time notch in the curve of rising health care costs. The insurers did this by contracting lower rates with health care providers, and then imposing financial penalties on patients who chose their care outside of the networks.
Patients were not pleased with limitations placed on their choices, but generally were not rebellious since they were often able to continue to see their own physicians, or, if not, were usually satisfied with their in-network substitutes.
The major insurers have been experimenting for some time with much more restrictive networks - networks in which they could contract for much lower rates in exchange for a higher patient volume. Individuals and employers have not responded to these market efforts because the restrictions were too severe. They excluded popular health care professionals and hospitals, sometimes completely, or sometimes by requiring unaffordable coinsurance payments by the patients.
But the environment has changed. The premiums for health plans are now very close to being truly unaffordable for most individuals and employers. With individuals being mandated to purchase insurance, and employers being exposed to penalties if their employees purchase plans in the exchanges, the market for plans with affordable premiums is being forced. The insurers must come up with plans that will meet the test of the market. The deeply-discounted, more tightly restricted plans are now finding their market.
These plans are terrible. Many will lose their primary care professionals. They will often not be able to use their local hospitals and many of their local specialists. Most referrals to centers of excellence will be prohibited. Although the Patient Protection and Affordable Care Act (PPACA) will require that provider networks provide choice, the law does not prohibit intolerably Spartan networks.
This, of course, is a setup for the death spiral of adverse selection for the plans with more adequate networks. Individuals with more significant problems will select plans that can better meet their needs, while the healthy will flee to the plans with Spartan networks once the premiums skyrocket.
When individuals shift to the more restricted plans, what will happen to the large number of physicians and hospitals that are denied contracts? Obviously their financial viability would be threatened, and many would shut down. As if we didn't already have enough problems with the deterioration in our primary care infrastructure, much of the entire health care delivery infrastructure could begin to crumble.
PPACA contains many measures designed to improve the functioning of the private insurers, but most of them will drive premiums even higher. Insurance innovations such as the Spartan provider networks were fully predictable.
What should really alarm us is that the business world thrives on innovation. Think of the possibilities that the private insurance industry can devise. Actually, it is very difficult for us who are trying to figure out how to get patients the care they need to come up with innovative concepts that will protect the business model of the private insurance industry, no matter the cost to patient care. It isn't in our DNA.
But there is absolutely no doubt whatsoever that we will see innovation, and it won't be healthy for patients, nor for their health care professionals.
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