To Infinity and Beyond: Exposure to Out-of-Network Bills Is High and Rising in the Individual and Small Group Markets

Robert Wood Johnson Foundation, October 4, 2018

The threat to consumers posed by bills from out-of-network (OON) health care providers is an issue that has been gaining prominence lately, with coverage from the media and growing policymaker interest.

With the growing use of managed care plan designs and narrow networks, OON coverage is becoming increasingly rare. This tendency is more pronounced in the fully insured market. In the individual market in particular, there has been a steep decline in the percent of plans that offer OON coverage, from 58 percent in 2015 to 29 percent in 2018. The decline in the small group market has been far less sharp, and probably tracks more closely to what is happening in larger employer plans. Part of the difference in the two segments reflects patterns in carrier participation in the individual market. National commercial carriers, which are more likely to offer broader network plans, exited the individual market in droves in 2016 and 2017, leaving a market that is dominated by Blues and Medicaid-managed care organizations (MMCO). MMCO plans almost always offer closed-network plans, and even many Blues plans have shifted to narrow network offerings in the individual market.

High Deductibles

The share of plans with OON benefits has declined, and so has the comprehensiveness of those OON benefits that are offered. In about 95 percent of individual and small group plans with OON benefits, the deductible must be met before there is any cost-sharing. OON deductibles are generally high, particularly in the individual market, where the median OON deductible is approximately $12,000. In about 30 percent of individual market plans with OON coverage, the deductible is greater than $20,000. The small group market is quite different, with a median deductible of about $6,000 and virtually no deductibles higher than $20,000.

Infinite Maximum Out-of-Pocket

After the deductible is met, cost-sharing usually takes the form of 50 percent co-insurance. This generally continues until the maximum out-of-pocket (MOOP) limit is reached. For ACA plans, the MOOP for in-network coverage is capped at $7,350 for individuals, and at about $14,700 for families. Yet for OON benefits, there is no such limit. In fact, about one-third of individual marketplace plans have no dollar amount for the MOOP, meaning that cost-sharing can continue basically forever once the deductible is reached. For plans that do have dollar limits, they are high. The median for the individual market is close to $19,000. In the small group markets this is much less common, as only 8 percent of plans with OON benefits have no MOOP limit. Median out-of-pocket maximums for plans with dollar limits are about $15,000 in the small group market.

OON bills are a source of concern to consumers, and a recent study showed that approximately 20 percent of hospital visits among patients with large group coverage resulted in an OON bill. In the case of medical emergencies, the ACA requires that OON care is reimbursed at in-network rates, although depending on state law, providers may still “balance bill” patients. Consumers with plans in the individual and small group markets have a high level of exposure to these charges. Narrow networks increase the likelihood that providers are out of network. Many plans in the small group market and most plans in the individual market do not have any OON coverage at all, and for those that do, the coverage tends to be very minimal, leaving consumers with a lot to lose in the event of an unpleasant surprise.…

One of the most important reasons for enactment of the Affordable Care Act was the inadequacy of plans offered in the individual insurance market. Though some of the deficiencies were corrected, such as ensuring availability of coverage for individuals with pre-existing medical conditions, it is not the nature of the insurance industry to forgo opportunities to improve the business model of their insurance products. This report on what has happened in the individual insurance market since the implementation of ACA should raise alarms.

With an emphasis on controlling access to care by establishing narrower networks of health care providers, the insurers have reduced coverage provided for care obtained outside of the networks. As recently as 2015, 58 percent of individual plans offered coverage for care obtained outside of networks. This year that has declined to only 29 percent. If there is out-of-network coverage the average deductible is about $12,000 and for about 30 percent of the plans it is over $20,000. Since out-of-network care is often unavoidable, the potential financial exposure can be very great in spite of the effort of some states to regulate such exposure.

The Affordable Care Act did place limits on the maximum out-of-pocket costs to which enrollees in exchange plans would be exposed, but this maximum may not apply to care obtained out-of-network. Some individual plans do have a maximum on out-of-network out-of-pocket costs though the average maximum is about $19,000. The majority of individual plans do not have an out-of-pocket maximum and thus cost sharing can continue forever. Thus this coverage would be inadequate for a majority of individuals who had to obtain a significant portion of their care out-of-network.

It is not in the nature of the private insurers to find ways to remove financial barriers to care for patients. Quite the opposite. To meet their own business goals, they increase barriers. After the implementation of ACA we have seen an increase in the use of narrow networks and higher deductibles. If we find ways to reduce the negative impact of these policies on patients, the insurance industry, as masters of innovation, will find more ways to avoid paying for health care. In a way it is our fault because we have allowed our elected representatives to keep these people in charge.

Suppose we had a well designed, single payer national health program – an improved Medicare that covered everyone. Networks designed to limit access would not exist. High deductibles designed to erect financial barriers to care would not exist. Unlimited out-of-pocket spending would not be a problem since costs for essential health care services would be fully covered. Public programs are designed to serve patients whereas private programs are designed to serve business interests.

Again, insurer innovation since full implementation of ACA has been detrimental, as this report shows, and further detrimental innovation is inevitable as long as we leave the private insurance industry in charge. Instead of continuing with our relatively feeble efforts to try to level the playing field, let’s establish our own level field supervised by our own public stewards.

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