‘Skinny’ (Limited) Networks Dominate ObamaCare Exchange Individual Plans: What You Need To Know

To-Prevent-Surprise-Bills-New-Health-Law-rules-Could-Widen-Insurer-NetworksEarlier this year, the parents of 5 month old Gabriella, took their daughter to Seattle Children’s Hospital over concerns with the shape of her tiny head. Seattle Children’s is the leading pediatric transplant, cancer and cardiac hospital in that region of Washington State. Thankfully, a CT scan that the hospital performed found a rare birth defect in little Gabriella that can now be treated and, hopefully, cured.

Seattle Children’s Hospital, however, has been excluded by five of the seven plans offered on Washington’s new health insurance exchange that was created by America’s new Affordable Care Act. At the dawn of the new healthcare reform law we are learning that health insurers, under pressure to keep premiums low, are often eliminating the most expensive hospitals in a cost cutting move that limits patient’s options. The law requires insurers to ‘broaden health benefits, restricting how premiums can vary with age and adds a new health insurance tax’ said Robert Zirkelback, a spokesman for America’s Health Insurance Plans, a trade group. “Narrowing networks to those that accept lower payments in exchange for higher patient volumes is one way to help mitigate cost increases for consumers” he said.

Seattle Children’s Hospital sued the Washing Office of Insurance Commissioner (OIC) late last year in an attempt to be included in more of the Exchange’s plans. In late January of this year the State of Washington replied by saying “nothing in the law dictates inclusion of a specific provider, regardless of their preeminence or sympathetic patient base. So long as issuers meet the legal standards for adequacy and covered services the OIC does not manage their business arrangements for them”.

As such, the state of Washington (and others) have concluded that if an insurance company wants to offer medical insurance plans with limited networks of providers they are allowed to do just that. Whether folks want to buy such plans, or for that matter care about which doctor or hospital is in their plan, will be up to them. In our experience, when we talk about the emerging issue of limited networks most people assume all networks are the same and it is clear that especially for individual medical plans offered through the new state or federal exchanges that that is simply not the case. Of course having an agent help you navigate through this issue and the many others that are part of the massive new, complex, law would be wise. Read on to learn why having competent guidance is a good idea…

Skinny, Narrow, Limited, Ultra-Narrow
or Broad networks? Oh My

Speaking of the insurer’s business arrangements, I first heard an insurer openly use the term ‘skinny networks’ last October when I was helping a large long term business client conduct its annual open enrollment meetings for its employees. During a break in the meetings, I overheard the health insurer’s representatives that business, had selected speaking about their new ‘skinny network’. When I asked them about the terms they explained that their company was testing limited, so called ‘narrow’, provider networks in Tampa and expected to use them more widely in other places. I am surprised by how little has been written about this topic within the mass media, as it is one that impacts many of the 8 to 10 Million or so people that bought coverage on the healthcare Exchange late last and early this year.

Hospital-networks-Configurations-on-the-exchanges-and-their-impact-on-premiumsWhether you call them skinny, limited or narrow, the fact is that in order to compete for online sales, insurers have often dramatically reduced the number of providers offered for certain medical plans in our new healthcare reform marketplace. Consider the recent McKinsey & Company report entitled: Hospital Networks: Configurations on the Exchanges and their Impact on Premiums which explains that ‘the configuration of hospital networks is changing on the new pubic exchanges and, in many cases, having a direct impact on premium levels’. Their report continues by explaining that insurers are now competing based on ‘the segmentation and valuing of choice in the form of a proliferation of products with varying breadths of hospital networks. This trend is consistent with what we see in most well-functioning consumer markets ranging from cell phone plans to automobiles – a variety of choices comprising different value propositions at different price points’.

I am not sure I would see one’s health insurance as a product along the lines of a cell phone usage plan or buying your new car but that aside, the use of a limited networks is clearly a fact of individual health plans being offered online today. The McKinsey Center for U.S. Health System Reform collected data from 80 insurers and reviewed 120 different ‘Silver’ plans offered on the 2014 individual exchange in 20 different urban American areas that spans 25% of America’s non-elderly (those not on Medicare) population. Here is what they found:

  • 70% of all of the networks they looked at are defined as ‘narrow’ or ‘ultra-narrow’. In other words, insurers are using more limited networks for these plans than, say, they would offer to their commercial business clients.
  • Those plans that were offered with the broadest hospital network had higher premiums with a median premium increase of 26% between broad and narrower networks from the same insurer.
  • 84% of the lowest priced silver medical plans utilize narrow or ultra-narrow networks. Within that figure, 58% of the lowest priced medical plans utilize ultra-narrow networks and 26% of the lowest priced Silver plans utilize narrow networks.
  • Within the sample 80 insurers, McKinsey identified seven insurers that in various areas of the country that offered multiple silver networks for the same medical plan (HMO, PPO etc.) which then allowed them to determine how those insurers actual priced varied by network breadth. Their study found that premium price increased in the broader networks between $21 to $74 per month, with a median result of $64 per month. This, they, concluded, was equal to an increase in premium from 7% to 37% with a median increase of 26%.
  • Academic (teaching) medical centers are most commonly found participating in the broader, more costly, exchange plans. The study concludes that 35% of ultra-narrow networks have an academic medical center in network while 94% of all broad networks studied have these type of facilities. When an academic center is included the premium was found to be about 10% higher ($303 per month versus $275) than when one is not in a network.

So what does all of this mean? Mainly it means that if you prefer to use a given doctor or hospital it pays, and always has, to review the network of providers along with coverage, cost, financial stability and all else before selecting an insurance company or plan. More now than ever before. Just because a given insurance company that you’ve used in the past might have included your preferred providers does not mean that these new Exchange type plans will have the same providers. No matter the insurer or how big they are or how much they advertise you absolutely must consider all of the details before selecting a company and plan.

It also means that we as consumers can decide what’s important to us. Lower deductibles and copays that provide ‘broader’ coverage or higher ones that lower costs. A plan (such as an HMO where local care comes from a set network of providers or one that allows you to use network and non-network providers such as a PPO or POS plan). And, of course, a network that includes your preferred doctor(s) and hospital(s) of choice if that’s important to you.

At Morris & Reynolds we’ve been providing medical insurance to individuals and groups since 1950. Over the years, certainly since the birth of provider networks and managed care plans, we have always suggested careful review of any prospective insurer’s network and are happy to help you research every plan and network in the market to determine if the providers that are important to you are included. No matter your need or question we are here to help you navigate through this new world of healthcare, skinny, narrow, limited, ultra-narrow or broad networks included. For the pleasure of providing your protection, thank you.

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