Breaking into a Narrow Network
Beginning in 2017, health insurance plans will be classified as basic, standard, or broad network so that consumers can better understand their options.
By Alpha Lillstrom
July 7, 2016
Like any for-profit corporation, health insurance companies are in the business of providing a service—paying for care—but are also seeking to gain revenue while meeting their business obligations. With the passage of the Affordable Care Act (ACA) in 2010, the insurance companies’ previously utilized tactics for controlling cost—limiting the benefits they cover and the people they insure—were outlawed.
The ACA was also designed to educate and empower consumers and thereby required that health insurance marketplaces list insurance products side by side, using universal terminology, in order to provide consumers the opportunity to compare plans, coverage, and cost all in one forum. This transparency was intended to increase consumers’ ability to shop for an insurance plan that met their health coverage needs at a price point of their choosing. It also meant that if insurance companies increased premiums without providing enough value, they would run the risk of losing customers to lower-cost competitors. At the same time, many new exchange customers were previously uninsured; therefore, insurers had little or no information upon which to predict their use of health care. That meant that insurers could not be sure where to set premiums or how aggressively to try to control costs, including the use of limited networks of physicians and hospitals that enrollees could use.1
These new rules forced insurance companies to rethink their business model. The ACA required that qualified health plans sold in the Marketplace offer provider networks that meet a general “reasonableness” standard.2 In order to achieve that standard and identify tactics to stay in the black, health insurance companies began to utilize elements of a managed care model they used three decades ago. One modern iteration of managed care has come in the form of “narrow networks” where insurers generally seek to offer consumers lower premiums in exchange for limiting the group of providers available to plan enrollees.3 By one measure, almost half of all Marketplace plan networks in 2014 were “narrow” and nearly all consumers had access to buy such a plan if they chose.4
From the insurer’s perspective, the narrow network strategy is a means of increasing plans’ negotiating power and encouraging providers to accept lower reimbursement.5 This dynamic shifts the power to the insurers and away from both providers and patients. In some cases larger provider groups or hospital systems have pushed back.6 However, those in private practice do not have negotiating leverage or deep pockets and therefore are extremely vulnerable in these situations. Narrow network options may also jeopardize consumers’ ability to obtain critical services, access to their provider of choice, or expose them to potential significant financial costs of out-of-network care if their plan’s network is too narrow.7 An ideal network is transparent and designed to optimize choice, quality, and cost, while also focused on providing consumers accurate and timely information and tools they need to make informed choices.8
In its least disruptive form, “insurers may offer narrow network plans to attract price-sensitive consumers who are willing to trade network breadth for less costly premiums and other out-of-pocket payments.”9 Many patients’ needs will be met by the smaller network of providers. However, in choosing a narrow network plan, there is a real risk that the unanticipated needs of a patient may not be adequately covered by those providers in the limited network. Nor does it ensure that patients are able to seek care from a private practitioner or maintain the patient-provider relationship they have already built. This means private practitioners must demonstrate value and quality while actively negotiating with insurance carriers if they desire to be part of a network.
Model Law for Network Adequacy
Recognizing the growing concerns about the impact and implications of narrow networks, policy makers on the state and federal levels have been evaluating their options. The National Association of Insurance Commissioners (NAIC) released their network adequacy model law in the fourth quarter of 2015.10 In its model law, NAIC lays out the baseline for what legislation should require of an insurer: “a health carrier providing a network plan shall maintain a network that is sufficient in numbers and appropriate types of providers . . . to assure that all covered services to covered persons . . . will be accessible without unreasonable travel or delay.”11 However, the model law cautions that when assessing adequacy “particular attention should be given to network sufficiency, marketing, and disclosure in certain health carrier network plan designs, such as tiered, multi-tiered, layered, or multi-level network plans, which include different access to benefits and cost-sharing based on a covered person’s choice of provider.”12 Should a situation arise where a patient’s needs cannot be met within the network, the model law suggests that “the health carrier shall treat the health care services the covered person receives from a non-participating provider as if the services were provided by a participating provider, including counting the covered person’s cost-sharing for such services toward the maximum out-of-pocket limit applicable to services obtained from participating providers under the health benefit plan.”13 While the model law suggests minimum requirements for health carriers offering plans that are restricted to a limited pool of providers,14 it does not discuss the flip side—how to facilitate including the appropriate number and variety of types of providers in these networks. States are beginning to use this model law to draft and pass their own network sufficiency laws.15 Private Practice Section (PPS) members could make important contributions to the discussion by reaching out to their state legislators to discuss the impact narrow networks have had on their practice and their patients.
A twist on the narrow network model is a “tiered network,” which offers consumers a broader array of choices and more flexibility. Participating providers are ranked by insurance plans for quality and cost, then placed in ranked tiers by that insurance plan.16 However, because there are no standard evaluations or thresholds to divide providers between top and lower tiers, a provider can be ranked higher by one carrier than another, which can confuse the consumer and perturb the provider. The method by which insurers determine “quality” is also a conundrum at least and problematic at most.
Within the tiered model, insured parties are encouraged to use lower-cost providers but, unlike narrow networks, some coverage is granted for other providers. Those in tiered networks can decide when to avail themselves of different levels of cost-sharing—paying less when they choose providers in “high-value” tiers. This consumer-facing strategy shifts costs to patients who go to the more expensive providers rather than spreading the cost of more expensive care across the whole population.17 “Expectations for the tiered network approach are that consumers can influence the market if they choose lower-cost providers and that providers will be motivated to change their behavior in order to maintain or improve their tier ranking and market share.”18 Although the “tiered network strategy takes advantage of recent advances in the use of data to develop profiles of provider groups or individual providers, it is important to remember that data on which tiered networks are constructed may be from prior years and therefore may not reflect current practices or circumstances.”19 This tiered model could provide opportunities for private practitioners to negotiate rates and participate in a network. However, while this option might sound appealing it has not been used extensively; in 2014, less than one-fifth of small and large employers used tiered networks.20
The Department of Health and Human Services
In December 2015, the Centers for Medicare & Medicaid Services (CMS) at the Department of Health and Human Services (HHS) proposed new rules for overseeing plans sold on the Marketplace that included the introduction of new standards on network adequacy and standardized plan options.21 However, in the final rule this March, CMS opted not to establish measurable standards of adequacy for access to in-network providers; instead it encouraged insurers to offer standardized plans but stated that it would “not restrict issuers’ ability to offer non-standard options.”22 In efforts to encourage quality regulations by the states, CMS endorsed the NAIC model law discussed earlier and suggested that they could be more prescriptive in the future, depending on how states responded.23 Most helpfully, the rule requires that, beginning in 2017, each plan will receive a designation as having a “basic,” “standard,” or “broad” network so that consumers can better understand the range of providers and facilities available through these plans.24 CMS paired its final rule with operational and technical guidance sent to all issuers in the Federally Facilitated Marketplaces.25 PPS will continue to collect examples and monitor network access obstacles faced by private practice physical therapists in order to bring them to the attention of CMS.
Like many issues in health care policy, legislation and regulation considers the impact on industry and consumers before evaluating how it will affect providers. Insurers are focused on competitive pricing and using narrow and tiered networks as a tool to achieve this goal while generally trying to ensure that the number of providers is adequate. It is unclear how often access considerations come into play.26 Thus far, it does not appear that quality has been a criterion for exclusion or inclusion of a provider in a network.27 Patients have “exhibited significant loyalty to the specialty physicians whom they had seen previously, even those with poor tier rankings and regardless of type of specialist.”28 Therefore it is no surprise that consumers have pushed back after experiencing lack of access to their provider of choice, or a shockingly high cost should they receive care outside of the restricted pool of providers.29
The insurers’ large practice and hospital-centric business models do not offer other providers and suppliers, particularly those in private practice, easy access to a network. Some of you may be eager to be included in a network, while others may not see the value in negotiating with the carriers. However, because consumers can exhibit a strong loyalty to their providers, some practitioners with thriving practices will be able to avoid participating in networks or negotiating with the insurers.
For PPS members this means it will be necessary to: (1) decide if participation in a network is beneficial, essential, or desirable to their practice; and, if so, (2) identify and employ strategies to engage with the carriers to become a part of their network. If and when these two steps are accomplished, it will be essential for the physical therapist to scrutinize the terms of the contract that creates the arrangement.
1. Brookings Institution, Henry J. Aaron, Justin Giovannelli and Kevin Lucia, The Next Stage of Obamacare Reform, May 24, 2016 (this piece originally appeared in Real Clear Markets).
2. Pub. L. 111-148, 124 Stat. 782 (2010) § 1311(c)(1)(B) (codified at 42 U.S.C. § 18031(c)(1)(B)). The Department of Health and Human Services rulemaking will be discussed later in this article.
3. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp2. Accessed June 2016.
4. N. Bauman, E. Coe, J. Ogden et al., Hospital Networks: Updated National View of Configurations on the Exchanges (New York: McKinsey Center for U.S. Health System Reform, June 2014).
5. http://academyhealth.org/files/HCFO/RIBrief0315.pdf pp3. Accessed June 2016.
6. A good case study for this dynamic was the dispute between Highmark Blue Cross Blue Shield and the University of Pittsburgh Medical Center (UPMC) that blew up in 2014. Despite being the dominant hospital system in the region, UPMC refused to accept Highmark’s renewal contract because Highmark (the state’s largest insurer) bought rival hospital network West Penn Allegheny Health System. For a time it seemed as if UPMC would no longer be an in-network provider for any individual holding a Blue Cross Blue Shield insurance product from any state in the union. In November 2015, the parties agreed to a state-brokered deal to allow for in-network coverage for patient care that qualifies as “continuing course of treatment.” http://triblive.com/news/adminpage/9427569-74/upmc-highmark-network. Accessed June 2016.
7. www.commonwealthfund.org/publications/issue-briefs/2015/may/state-regulation-of-marketplace-plan-provider-networks. Accessed June 2016.
8. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp3. Accessed June 2016.
9. http://academyhealth.org/files/HCFO/RIBrief0315.pdf. Accessed June 2016.
10. www.naic.org/store/free/MDL-74.pdf. Accessed June 2016.
11. www.naic.org/store/free/MDL-74.pdf, pp7. Accessed June 2016.
12. www.naic.org/store/free/MDL-74.pdf, pp7. Accessed June 2016.
13. www.naic.org/store/free/MDL-74.pdf, pp9. Accessed June 2016.
14. www.naic.org/store/free/MDL-74.pdf, pp13. Accessed June 2016.
15. For example, the Maryland insurance commissioner will have until the close of 2017 to adopt regulations “to establish quantitative and, if appropriate, nonquantitative criteria to evaluate the network sufficiency of health benefit plans” that use provider panels, under legislation (H.B. 1318) signed April 26, 2016 by Gov. Larry Hogan (R). BNA’s Health Insurance Report, 4/20/16.
16. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp3. Accessed June 2016.
17. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp2. Accessed June 2016.
18. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp2. Accessed June 2016.
19. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp3. Accessed June 2016.
20. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp3. Accessed June 2016.
21. Department of Health and Human Services, Proposed Rule, Notice of Benefit and Payment Parameters for 2017, 80 Fed. Reg. (December 2015), www.federalregister.gov/articles/2015/12/02/2015-29884/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2017. Accessed June 2016.
22. Department of Health and Human Services, Final Rule, Notice of Benefit and Payment Parameters for 2017, 81 Fed. Reg. (March 8, 2016). www.federalregister.gov/articles/2016/03/08/2016-04439/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2017. Accessed June 2016.
23. http://familiesusa.org/blog/2016/03/cms-finalizes-health-insurance-plan-standards-enrollment-2017x. Accessed June 2016.
24. http://familiesusa.org/blog/2016/03/cms-finalizes-health-insurance-plan-standards-enrollment-2017x. Accessed June 2016.
25. www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2017-Letter-to-Issuers-2-29-16.pdf. Accessed June 2016.
26. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp5. Accessed June 2016.
27. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp2. Accessed June 2016.
28. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp4. Accessed June 2016.
29. http://academyhealth.org/files/HCFO/RIBrief0315.pdf, pp3. Accessed June 2016.
Alpha Lillstrom is a registered federal lobbyist working with Connolly Strategies & Initiatives, which has been retained by PPS. An attorney by training, she provides guidance to companies, nonprofit organizations, and political campaigns. For six years, she served as Senior Policy Advisor and Counsel for Health, Judiciary, and Education issues for Senator Jon Tester (Montana), advising and contributing to the development of the Affordable Care Act, as well as working on issues of election law, privacy, government transparency, and accountability. Alpha has also directed Voter Protection efforts for Senators Bob Casey, Al Franken, Russ Feingold, and Mark Begich. She was Senator Franken’s Policy Director during his first campaign and was hand-picked to be the Recount Director for his eventual 312-vote win in 2009.