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You are here: Home / Anderson On Health Insurance / Exchange plan quality

Exchange plan quality

by David Anderson|  December 22, 20177:00 am| 6 Comments

This post is in: Anderson On Health Insurance

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DaddyJ asks a good question:

we here in NW suburban Chicago are seeing a palpable degradation in the quality of care being offered by BCBS narrow networks. My family (non-subsidized) felt driven onto a far more expensive Silver plan rather than stick with last year’s narrow-network Bronze, as we have seen with our own eyes in the past 6 months what looks like hospitals/docs in the narrow network having the life squeezed out of them by the dominant insurer….

This is a really good question.  Let’s start with some data and then theorizing.

The University of Pennsylvania LDI team tracks network size on the Exchanges.  Their most report showed that the super narrow networks are becoming less common:
 

We find that the overall rate of narrow networks is 21%, which is a decline since 2014 (31%) and 2016 (25%). Narrow networks are concentrated in plans sold on state-based marketplaces, at 42%, compared to 10% of plans on federally-facilitated marketplaces. Issuers that have traditionally offered Medicaid coverage have the highest prevalence of narrow network plans at 36%,

I think the major thing we need to think through is the incentives of pricing structures. Narrow networks, all else being equal, will have two sources of pricing advantages over broad networks. First, the narrower the network, the less likely it will include all the doctors and facilities that a person who knows that they need a lot of care will want to use in the network. This aspect of a narrow network drives some people who are disproportionally expensive to choose the broader network. Secondly, the narrow network is a subset of all available providers in a regional broad network. The narrowness gives the insurer a stronger ability to say no which means the average cost per unit of service can decrease.

The ACA subsidy formula gives a push for relatively healthy, subsidized individuals to buy the least expensive plans possible. This probably means either the least expensive or Benchmark Silver plans for people who qualify for Cost Sharing Reduction (CSR) help or Bronze plans for people who make more than 200% (~$24,040) and less then 400% (~$48,080) FPL.

We looked at Silver Spamming in October 2015:

We know that most subsidy receiving individuals who are buying on the Exchange are post-subsidy price sensitive. Owning the #2 Silver and then seeing a large gap between #2 Silver and the first competing Silver means that almost every price sensitive shopper who is healthy (as they don’t need a broad network) will buy Celtic/Ambetter. Individuals with known medical conditions are less likely to go to a narrow network plan because they already have relationships with providers that work for them. It is an attempt to buy healthy membership and dump sicker people to other insurers.

In these markets where there is a Mediciad-esque narrow network insurer, there is a strong incentive for every insurer to make their networks smaller and cheaper so as to claw back some of the reasonably healthy membership that otherwise would have gone to the hyper narrow network insurer.

This is the incentive to continue to go narrow and cheap. Most people don’t use many services so they are buying on premium more than anything else so steps that lower premium are valued by the insurer more than steps that make the experience pleasant.

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6Comments

  1. 1.

    Yarrow

    December 22, 2017 at 10:16 am

    I have no idea if the network on the Silver plan I got this year is narrow or what but what I do know is that it has zero of my doctors in it. Zero. Some of them I’m unwilling to give up so I’ve been asking about negotiated cash prices. I don’t mind paying out of pocket a few times a year but I’m concerned about the lab work.

    Two of the doctors have in-office labs. They are run by LabCorp but the doctor contracts with them to have the lab in the office. It is apparently billed via the doctor so he gets a cut. Several years go, my health insurance only covered Quest lab and I used to be able to get the doctor to write a lab slip and go to a Quest draw station. Now I don’t know if he’ll do that sort of thing for Lab Corp because he has one in-office.

    New insurance covers LabCorp but I have a couple of questions:
    1. Will insurance pay for labs if the order is written by an out of network doctor and done in a Lab Corp lab inside said out-of-network doctor’s office. There is zero out-of-network coverage?
    2. Can the doctor write a LabCorp slip that I can take to an outside draw station or is he/she contractually prohibited from doing that since he’s contracted with them to be in-office?

    I don’t mind paying the office visit negotiated cash price a 3-4 times a year (somewhere between $100-150 so far), but the labs run about $1,400 each time. One doctor’s office said the negotiated cash price for the labs would be around $700, which is again prohibitive. And that’s just a guess. Depends on the labs ordered.

    It’s very frustrating.

    I should add that not one insurance option on the exchange had any of my doctors in it. Not one. So it wasn’t like paying more would have got me more coverage.

  2. 2.

    David Anderson

    December 22, 2017 at 10:54 am

    @Yarrow: A prescription for a lab draw can be filled anywhere. So a scrip for your labs can be taken to a LabCorp site and your insurer will pay that claim after normal cost sharing.

  3. 3.

    Bob Power

    December 22, 2017 at 11:10 am

    Pieces like this need to always include at least a passing reference to the effects of risk adjustment. Ask an ACA-fluent actuary the following question. “For profitability, which would you rather have, healthy low-scoring ppl or sick high-scoring ppl?” That actuary would now almost certainly answer “Sick high-scoring ppl!!”

    With that in mind, using an ultra-narrow-network strategy (with the intention to chase complex cases away) is simply…dumb.

  4. 4.

    Yarrow

    December 22, 2017 at 11:16 am

    @David Anderson: That’s what I used to do when the insurance only paid for Quest labs. It’s a pain but doable. The real question is, will the doctor fill out the lab slip for Lab Corp to be done elsewhere when he has contracted for Lab Corp to be in his office.

    Also, I swear I read in some fine print somewhere that the insurance may not pay for prescriptions written by doctors who are not in-network. My eyes are bleary from looking at so much health insurance fine print but I thought I saw that. I hope it’s not true because that’s going to screw up everything.

  5. 5.

    MP

    December 22, 2017 at 12:31 pm

    @David Anderson: Is that the case even for HMOs? That’s all that is avail here in Atlanta.

  6. 6.

    David Anderson

    December 22, 2017 at 12:58 pm

    @Bob Power: Disagree to some extent (see Centene as this is their explicit strategy and it is quite profitable)

    If we were working with Medicare Advantage risk adjustment, I would engage on this argument more. However the ACA risk adjustment formula is based on the average state wide premium which allows for a dumping game. The low premium carrier has most of the enrollment so average state wide premiums are depressed. The carrier with the broader network that is disproportionately attractive to sick people won’t be fully compensated for their cost of care even if the narrow network and broad network insurers are paying the same per unit cost of care. It is cheaper for the narrow network to underpay in risk adjustment outflows than to pay for a broader network.

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