HMO-Like Plans May Be Poised To Make Comeback In Online Insurance Markets

By Julie Appleby
Kaiser Health News, January 22, 2013

It’s back to the future for insurers, which plan to sharply limit the choice of doctors and hospitals in some policies marketed to consumers under the health law, starting next fall.

Such plans, similar to the HMOs of old, fell into disfavor with consumers in the 1980s and 1990s, when they rebelled against a lack of choice.

But limited network plans — which have begun a comeback among employers looking to slow rising premiums — are expected to play a prominent role in new online markets, called exchanges, where individuals and small businesses will shop for coverage starting Oct. 1. That trend worries consumer advocates, who fear skimpy networks could translate into inadequate care or big bills for those who develop complicated health problems.

Because such policies can offer lower premiums, insurers are betting they will appeal to some consumers, especially younger and healthier people who might see little need for more expensive policies.

Insurers, who are currently designing their plans for next fall, “will start with as tight a network control as they can,” says Ana Gupte, a managed care analyst with Sanford Bernstein.

Plans may also benefit from offering such policies because they are less attractive to those with medical problems, who can no longer be turned away beginning in January 2014.

Driven by consumer and employer demand for lower-cost plans, insurers are already rolling out narrow network policies that have shaved premiums 10 percent or more. A recent survey by benefit firm Mercer found that 23 percent of large employers offered such plans this year, usually among a choice of plans, up from 14 percent in 2011.

Many policies that currently offer a limited network of doctors and hospitals generally allow patients to go to out-of-network providers, with whom they do not have negotiated prices. But patients who seek such care face significant co-payments, which often start at 30 percent of the bill and can go as high as 50 percent.

It is often hard for consumers to figure out how much they might be charged if they go out of network, says Lynn Quincy, senior policy analyst at Consumers Union, publisher of Consumer Reports magazine. In addition to meeting separate annual deductibles for out-of-network care, patients can be “balance-billed” by doctors or hospitals for the difference between what the insurer pays them and their total charges.

That doesn’t change under the federal health law, so consumers could be left on the hook for tens of thousands of dollars.…

So we didn’t get single payer, but at least we got a bill that brought us an end to insurance company abuses, so they say. But did we really?

Most people purchasing plans through the insurance exchanges will select plans with lower premiums which means the bronze and silver plans that have actuarial values of 60 or 70 percent. To achieve these low values, the plans will require large deductibles and other cost sharing  – expenses that may not be affordable for many who actually need health care.

This article and others have reported on the strategy of insurers to rely more heavily on “narrow network” plans – plans that greatly limit your choice of health care professionals and institutions. Obtaining care outside of the network can result in greater cost sharing plus balance-billing for charges that normally would be disallowed. Current networks are already restrictive enough, but these new super skimpy networks will leave patients even more dissatisfied than they were at the peak of the managed care revolution. And we thought we got away from that.

Although insurers would be prohibited from deliberately excluding more costly, sicker patients, the very design of these plans motivates the healthy to buy them and the sick to shun them. Thus cherry picking and lemon dropping will still be with us, even if not overt.

Can you imagine the celebrations in the board rooms of the insurance and pharmaceutical firms? Officers and directors dancing around the table Don McNeill-style, singing, “Happy days are here again!”