The Real Reason You May Not Be Able to Keep Your Doctor Under the New Healthcare Law

Here is what the President said at the American Medical Association Meeting in July, 2009––and likely lots more times:

“No matter how we reform health care, we will keep this promise: If you like your doctor, you will keep your doctor. Period. If you like your health care plan, your will keep your health plan. Period. No one will take it away. No matter what. My view is that health care reform should be guided by a simple principle: fix what’s broken and build on what works.”

We have all heard this repeated many times before in recent weeks. But with the front-page story in the Washington Post yesterday, “Health Insurers Limit Choices to Keep Costs Down,” it’s as if somebody rang a new bell this time focused on the “you will keep your doctor” part.

It’s not like we haven’t been talking about more narrow networks becoming a staple of the new health insurance exchanges.

It is as if some of this stuff is just starting to sink in.

Why the limited networks?

In the old health insurance market, insurers competed for business through price and plan design. Network size has historically been a minor factor with consumers and employer plan sponsors expecting to be able to use about any doctor or hospital, especially those with the best reputations.

But with the Affordable Care Act, health plans lost two of their historically big plan pricing variables; medical underwriting and plan design.

Under Obamacare, insurers can no longer underwrite, or exclude people, to keep the cost of their individual market health insurance plans down––a good thing.

Under Obamacare, insurers can no longer offer a wide variety of health insurance products in the individual health market––a good thing when it gets rid of the worst of the health plans out there but not such a good thing when it gets rid of the many policies people could choose and have liked and are now mad about losing. Now, all health plans have to fit into four strict boxes: Bronze, Silver, Gold, and Platinum. And, these boxes can only differ by out-of-pocket costs––not benefits.

So, if a health plan can no longer vary its benefit choices, how can it distinguish itself on price?

A big variable therefore becomes the provider network. How big a variable? Take a look at this from a recent paper by the Center for Studying Health System Change:

This chart depicts the variation in hospital outpatient prices in 13 different U.S. cities. Hospital inpatient services also have wide variation. The authors pointed out that, “Typically, the highest-priced hospital is paid 60% more for inpatient services than the lowest- priced hospital,” within the same market.

With this kind of hospital price variation and no other ability to vary the product there should be no surprise that insurers are now using narrow networks as a means to compete on the basis of price.

Physician prices also have a lot of variability within a market. The authors found, for example, in almost all thirteen markets, the prices paid to primary care practices fell into a narrower but still significant range, typically between 85% and 135% of the Medicare fee schedule.

I do not mean to imply this is the only tool health plans have. Just how they manage toward better-cost and quality outcomes also becomes a key variable. But you can easily see that just which doctors and hospitals a health plan picks for a plan to offer on the health insurance exchange can make a big difference in what that plan charges its customers.

Health plans and employer sponsors for sometime have also used “high performing” networks––a cost/quality distinction––as a means to better manage the cost and quality of care. However, it appears that many of these lower cost exchange plans are more focused just on provider prices.

Clearly, one of the consequences, intended or unintended, of Obamacare has been a dramatic escalation in the use of provider networks to vary health insurance exchange premiums.

Perhaps more notable, is that some health plans are only offering narrow networks on the new health insurance exchanges. Health plans, figuring that a great many of the new exchange customers will be coming from the ranks of the uninsured have decided to craft plans that largely include providers located where many of these uninsured people live and where they are most likely to get their health care anyway––perhaps not as big a deal for these folks who, because they are uninsured, don’t have a regular provider relationship. But it also means these people will not have access to some of the most respected centers of excellence if they have a serous illness.

That has led to criticism that some of these networks are offshoots of Medicaid networks.

Another unintended consequence of this is that these narrow network plans are almost certain to become the lowest cost plans in the exchange. Remember, the federal health insurance subsidies are tied to the second lowest-cost Silver plan. Which health plan is offering that second lowest-cost Silver plan? Likely one of these narrow network plans. As a result, if you want a wider network plan, any cost difference for that plan becomes the responsibility of the consumer.

People who might be accustomed to broader networks found in employer health plans will have to either buy-up to better plans or may find their choices limited on the exchange.

Should we now regulate the health plans and force them to give everybody access to any provider they want? We could do that.

And, we could also have another rate shock debate.

I am reminded of that old axiom in health care policy. The health care system is like a balloon, you push it in here and it just pops our there.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

25 replies »

  1. University of Washington Medical Center may be a “public institution” in terms of where it is located, but it sure is not public in terms of being free to the user like a police station, fire department, or public library.

    This is just a hobby horse of mine. I want to see many more free public hospitals in America.

    Now my real question is this:

    is this hospital staying out of networks because it is too arrogant to cut its fees?

    or is it being kept out of networks by insurers because it attracts high cost patients?

    I do not know the answer, and would welcome any drilling down.

  2. To put it another way, if the youth who flips your burgers doesn’t have affordable access to “top tier” providers, why should you?

  3. People and institutions have the RIGHT to choice, but, maybe that is what disturbs those of us who fear this law’s true agenda.

    Imagine, people are angry that providers and organizations have the gall to refuse to participate. Umm, this is still The United States of America right now, not the USSR!

    Incredible how easy people relinquish freedoms and rights just to access this alleged right to health care. Makes you wonder why those silly people, you know, the ancestors who fought and some died to reject British rule to free this land as this country now, did so just for you to dump those freedoms and rights in the toilet.

    But, you all go ahead and pontificate over statistics, theorems, and political perspectives how this law will validate the public will.

    Simply amazing what transpires among alleged well educated and intellectual commenters.

  4. There is more complexity here than I can master, but let me offer one brief observation.

    Jeff Goldsmith states that he will have to drive 200 miles for some surgeries.

    And Jeff is a perceptive observer.

    In Canada. some patients in the prairie provinces have to go 1,500 miles for surgeries. Canada does not fund neurological or cancer units in cities of just 50,000.

    Kind of reminds me of the WWII histories that I read. What American
    GI’s called hardship was nothing to Russian soldiers.

  5. I live in Washington State in Seattle and not one of the plans offered through the exchange for the county Seattle is in includes the University of Washington Medical, a public institution, as an in-network provider. As the only medical school for four states, UW is a major provider for many people. It has not received a big uproar, yet, as many people assume the ‘find provider’ capability is just not working. That might be true, but if you call the insurance companies directly, they tell you UW chose not to be in-network, but neogitations can occur until December 31. I don’t see how a public institution can be allowed to make that choice and how waiting until the last minute is fair.

  6. Those who find themselves locked out of the provider networks of their choice must clench their fists, and think of the contribution they are making to Health Care Equity. This therapeutic exercise will help while away the many hours spent in cheerless waiting rooms. Sometimes you just have to “take one for the team.” But you shouldn’t expect families earning less than $94,500 a year to be decently appreciative of the contribution you are making to their premium subsidies. They see these subsidies as an “entitlement,” the fruit of a hard-fought partisan victory. And “to the victors…” We are under a new dispensation, and must adapt and accept.

  7. Jeff —

    One of the positive byproducts of the ACA, I think, is that hospitals are more likely to come to see the individual patient as the customer that it needs to please instead of the employer. This will be especially true if more employers move their pre-Medicare retirees and maybe lower paid workforces to the exchanges. Other employers may switch to a defined contribution / voucher / premium support approach.

    In this environment, hospitals will need to show that they offer cost-effective high value care. Reference pricing for diagnostic services and elective care will also reinforce that trend, in my view. For the vast majority of care outside of organ transplants, very complex surgery and treatment for rare cancers, community hospitals are just as good and sometimes even better than academic medical centers.

  8. The hospitals need to work less on becoming “unavoidable” and more on becoming the high value “hospitals of choice” of local consumers. That’s far more than clever pricing or advertising (which is nakedly self-serving and mostly wasted spending). It’s taking out waste (particularly of my time) and improving markedly their customer service and quality/safety. In other words, consumerism as an imperative spreads rapidly outward from the health plans to the hospital and physician community.

  9. My narrow network excludes my local, troubled academic health center for elective care. I will have to go to Richmond to Bon Secours or North Carolina (two hours south) to Duke to get elective surgery or cancer care. Frankly, that’s where I would have gone anyway.

    Us older folks will have more referrals from our primary care doc to hospitals, so the hospital or hospital-centric specialists he sends us to does matter more. For GI, ophthalmology, most urology, most orthopedics-that will be likely office based care. We’re blessed here in Charlottesville with a spectacular (newly rebuilt) community hospital that will take care of 75% of my needs.

    I think health plans should promote multiple choices for elective care and for diagnostic imaging, on a reference priced model, so I get to save money by selecting a high value choice. This is what CalPERS and Safeway have done in Calif, and it seems to have worked out well both for them and their employees.

  10. “I only need a network with my doc and the hospitals he uses or refers to.”

    Jeff, what PCP needs a hospital? If your doc is a specialist working in hospital then OK, but you may need several specialists in different hospitals.

    Then how about elective surgery and the surgeon of your choice? Don’t you want the ability to search out the best surgeon for a procedure?

    Networks are marketing tools, not treatment tools.

  11. Only a slight difference now being that you yourself can look for the plans and the provider network that each product offers. Of course, as you said, ACA does not change the basic three legged stool model. The only point being that if your health plan does become more of a consumer product, then the providers (and any other influencers for that matter) will now need to influence the individual, as opposed to the employer. The *consumerization* is the shift that is attributable to the ACA. If, eventually, the small group segment nearly goes away, or dwindles significantly in favor of individual market, that shift will be all the more marked.

  12. The University of Chicago was doing this more than twenty years ago.
    Its advertising focused specifically on this theme: be sure to tell your employer to include the U of C in their networks. This was at the beginning of the PPO era- see below comment. This is not a new idea springing from ACA.

  13. Right on, Matthew! The PPO was a huge sell out to the provider community, and enabled systems like Sutter and INOVA to push their prices up because they had become “must have” components of a broad network. Dominant hospital systems in Florida began asking major commercial insurers for 60% rate increases to remain in their networks. “Leverage” and adverse selection are the two major factors pushing up group insurance rates, even though we’re seeing record low OVERALL health cost growth. The small group and individual markets, because they are less competitive, have seen double digit premium increases since ACA was passed, even tho’ health costs are only rising nationally at 3.9%.

    But more perniciously, that drive to unavoidability became the main selling point for the merger explosion that hit the hospital industry after ACA. Hospital systems with $2-3 billion in revenues were being told by the merger “Industry” that they were too small to function effectively in the post-ACA environment.

    I don’t need a broad network. I only need a network with my doc and the hospitals he uses or refers to. I cannot believe that Robert L is presenting “any willing provider” regulation as the only viable alternative to narrow networks . . That’s the real sell-out.

  14. Joel, seek professional psychological help. At least it’s included now in the ACA – that should be of comfort to you.

  15. From today’s Kaiser Health News: Insurers Cut Doctors’ Fees in New Health Plans: “UnitedHealth Group sent some New York City physicians contract amendments recently as this month setting rates well below what doctors normally see from private insurance, including less than $40 for a typical office visit. . . .”

    A good curandero can do better than that, at least in Big Apple.

    So much that might have been done here, like funding the ability of emergency rooms to create facilities for routine care, and expanding the resources of community clinics. But that just wouldn’t have been sufficiently egalitarian, would it?

  16. I don’t know how any honest, attentive, and objective person who is not beholden to partisan agendas first and foremost does not see the pervasive dishonest, disingenuous, and bordering on criminal rhetoric and disruption in care options by Obamacare.

    The basics are pathetic here. The sign up Internet site is a failure going on 8 weeks next Tuesday, millions of hard working paying people have lost insurance coverage and at least 70% or more will pay 40% or more for at best equal if not lesser coverage options, starting out with losing access to their primary treating physicians, and finally, physicians have never been included in formulating this legislative process in any way through now.

    This is what antisocial people do in disrupting, dividing, and demeaning a culture or society in pursuing personal gains/agendas.

    What is scary is how pervasive and encompassing the supporters and cronies are throughout this process. Sorry, fatalistic naïveté or terminal misguided hope is not excuseable here, and that population among the Democrats involved are not vast.

    No, the agenda at hand is being managed by a large percentage who know what they are doing, and it is wrong and intentionally misguided.

    Yesterday’s Senate change in protocol was a loud and harsh exclamation to the agenda here. It is what defines pending tyranny and dictatorship goals.

    Hey, you all can keep adhering to that hope and change mantra. You will realize the agenda was “hope ya didn’t realize the change was NOT in the best interests for Americans”.

    Again, forget what Obama, Reid, and Pelosi keep uttering like parrots, listen to whom echoes their platitudes without any pause or hesitation, even when the content is overtly absurd!

  17. Bob is writing as though health insurers narrowing networks and beating providers down on price is a bad thing. It’s not only a good thing but it is the JOB of health plans to do that–something they have ignored for 15 years.

    Whether they can win a game in which the providers usually have huge market power is another matter, but what exactly is the alternative?

  18. If you have been following the Inova’s marketing (a regional hospital chain in Northern Virginia) – you may observe that it is telling consumers which insurance products to pick and which ones to not pick. This is something brand new that is happening under ACA. Before this year, Inova did not have to try to influence my opinion, because as a consumer, I had only a limited role in selecting the product – my employer was the main deciding entity.

    So, if a provider is large enough, they will certainly have a clout. Smaller providers, obviously, not so much. And this will lead to some kind of consolidation in smaller practices too.

    So, to your point – if the payer cannot really distinguish vary its benefit choices, how can it distinguish itself on price? Clearly, as you said, based on the network, and the Inova marketing is a good (albeit indirect) example of that.

  19. It is well known in health policy circles that most of the hospitals charging the highest prices command those prices because of their local and regional market power, not the quality of their care. The same is probably the case for the highest priced doctors. Other experts tell us that community hospitals do common things commonly (and well) every day and often better than the academic medical centers do them. To the extent that insurers have the quality data to back up these claims, they could do themselves and the rest of us a huge favor by sharing it with the public.

  20. The insurance companies are now going to be focused on limiting costs period. An article in Kaiser Health News points out how many docs are not inclined to participate in the exchanges as the rates for an office call will be 10-20% below Medicare reimbursement, maybe more.
    Similarly, the large high specialty institutions are not going to be likely to participate for huge reductions in their fees.
    Ultlimately, there’s going to be a two-tiered system, if we try to make everything absolutely equal, it will be equally lousy for everyone.

  21. No one (not even the federal government) can force the doctors to participate with a health plan or with a given exchange plan. If the medical practitioners don’t believe the reimbursements are adequate, or if they simply want to avoid the kind of patients they think they will get through the exchanges, they will not participate with them. To keep the prices lower, the health plans are likely offering lower reimbursements and the seemingly smaller networks are more a function of getting fewer doctors who are willing to participate (contract) at those lower reimbursement rates.

  22. I am shocked how bad the plans are under this new law. In my family, we have 3 individual health plans. All three have been cancelled because of this law and now to get a similar plan, it is going to cost twice as much and the deductible will be higher. The affordable care plans are actually worse than what I had before except they cover mental health. I really hope this law gets revoked because it is going to really change my standard of living. I am looking at only having health insurance for my son now while me and my wife go without. Some benefit…

  23. Many (and they were very vocal here) nursed the hope that we could give the indigent much the same “quality of care,” and liberality of choice, as that enjoyed by the affluent, with the existing provider network. There is simply no reasoning with them.

    “Top tier” providers, and latitude in provider selection, are a competitive “must” in the marketing of group policies to employers. Highly restrictive plans with networks of “lower tier” providers are a certain formula for a malcontent workforce. Let’s face it: Someone has to keep the “lower tier” occupied, and it will be done through these individual exchange policies and Medicaid.