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Thursday, 16 July 2015 10:59

Cost-conscious consumers weigh tradeoffs of smaller, localized care networks

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It’s the money that matters.

According to a new survey, the choice of doctors and hospitals appears secondary for many people who buy their own health coverage and opt for a lower premium.

The findings from the Ann Arbor-based Center for Healthcare Research & Transformation indicate that health policies using so-called narrow or localized care networks are gaining acceptance from consumers buying individual coverage on a public health exchange.

Small employers could soon see the same type of lower-cost option for group coverage, as the emergence of narrow network plans brought on under federal health reform broadens.

Priority Health, for instance, wants to begin offering a group narrow network health plan along with an individual policy next year for small employers in Kent County that would exclusively use parent corporation Spectrum Health’s care network.

“As employers realize that consumers are willing to trade network size for price, I think more employers will also offer some of these narrower network products,” said Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation.

“We saw an increase in these exclusive provider networks and limited networks between 2014 and 2015, but we also see employers looking at those networks, and I think over the next few years, you’re going to see many of those same products offered in the employer market as well,” Udow-Phillips said. “I think this is actually quite a significant trend in the marketplace, and we’re seeing it across the country.”

The Center for Healthcare Research & Transformation’s fall 2014 survey of 1,000 Michigan residents found cost issues were twice as important to consumers buying an individual health policy as the size of the care network, as long as quality remains high. Among respondents, 88 percent said price was “very important” in buying an individual health policy and 12 percent rated it as “somewhat important.” Only 41 percent rated network size as “very important,” 38 percent said it was “somewhat important” and 21 percent ranked it as not important at all.

A recent national survey by consulting firm Accenture also found growing consumer acceptance of narrow networks that come with a lower-cost premium, according to a report by Modern Heath Care. Insurers say they see the same thing in their data.

The emergence of narrow network plans in the era of Obamacare poses a sharp contrast to the consumer revolt of the mid-1990s against tight HMO networks that limited choice. For years since, health plans pitched products based on a large network of doctors and hospitals that they offered.


A PUSH FOR EFFICIENCY

Care providers and insurers position narrow networks as a way to work closer together to drive out waste and improve care coordination and management for patients, thereby driving down costs. Promoted by the federal Affordable Care Act as a way to contain costs and expand lower-cost coverage, narrow network health plans generally use a single care provider exclusively and in general, cost at least 10 percent less than a policy with a broad care network.

In West Michigan, Blue Cross Blue Shield of Michigan’s HMO subsidiary, Blue Care Network, has a narrow network for individual and Medicare policies in Kent, Muskegon and Oceana counties using Mercy Health for people over 65 years old or for members who do not have access to group coverage.

Across its HMO and PPO products, Blue Cross Blue Shield has about 123,000 lives covered under narrow networks, said Senior Vice President Kevin Klobucar.

Launched two years ago, the Blue Cross Partners narrow network plan now has nearly 16,000 people enrolled in individual policies in Kent, Muskegon and Oceana counties, said Mary Boyd, Mercy Health’s vice president of regional network and system development. Another 2,000 are enrolled in Medicare policies.

Reimbursements and financial incentives that are built into the narrow network plan model enable Mercy Health to become more proactive in working with patients to manage their health, rather than reacting when a medical problem arises, Boyd said. Participating in the plan with Blue Cross allowed Mercy Health to begin altering practices for the new era of accountable care that compensates providers on their quality, outcomes and how well they take care of their patient population.

“What really has been a great learning (tool) for us is the ability to influence the care side. We’re fundamentally changing the care model,” Boyd said. “If you think of our former model of health care, it really was somewhat reactive. We waited for patients to come to us and then we treated whatever condition they had at that time.”

Blue Care Network also has a narrow network partnership called ConnectedCare in Kalamazoo and seven other counties with Together Health, a care network formed in 2014 by CHE Trinity Health, Ascension Health Michigan and Oakwood ACO in Dearborn.

In the Grand Rapids area, Humana Inc. formed a narrow network plan late last year with Metro Health for people buying individual coverage on the Michigan Health Insurance Marketplace.

Narrow network plans are geared toward not only offering consumers a more affordable option for coverage but also working with care providers that are adjusting to the population health movement, said Sue Barkell, Blue Cross Blue Shield’s senior vice president for health care value. They allow insurers and providers to pilot new care management and coordination models on a smaller scale before deploying them on a broader basis.

“The only way products like this can be successful is when you work with partners that are also connected to the population management kinds of thinking because otherwise, it’s just not going to be able to be successful over time,” Barkell said.

Narrow networks are primarily tied to individual health policies, although that’s beginning to change.

Mercy Health is pursuing the potential for extending the model to employers that are self-insured and are interested in contracting directly with a care provider, Boyd said. A move into the group market could come within the next year, perhaps through a private health exchange, she said.

“We’re in discussions about how we could take that to other markets,” Boyd said.


PRIORITY ENTERS MARKET

In Grand Rapids, Priority Health is presently seeking regulatory approval to launch a group narrow network product for small businesses in Kent County, along with an individual plan. The insurer hopes to start the program this fall for Jan. 1, 2016 enrollment. It would exclusively use Spectrum Health.

The products represent the first foray into the use of narrow networks for Priority Health, which will offer tiered networks to small employers. Priority Health until now has preferred “not to jump into” narrow network plans, instead emphasizing price transparency as a cost-containment strategy, said Chief Marketing Officer Joan Budden. The insurer now realizes it needs to follow the market trend, she said.

“It seems that the market is going that way and we want to meet the demand of our members and of the consumers in West Michigan,” Budden said. “We want to make sure that we gave people who currently have Priority Health or would like to be in Priority Health a more affordable option.”

Priority Health intends to brand the narrow network plans to clearly identify them as exclusively using Spectrum Health in Kent County to avoid any confusion about the size of the care network it offers, Budden said.


DRIVING TRANSPARENCY

The lack of clarity by some health insurers about the doctors and hospitals participating in their narrow network plans — as well as the full cost implications for consumers — has been a lingering concern. Some consumers buying the narrow network plan offered by Mercy Heath and Blue Care Network have lacked understanding of the high deductible that accompanies the coverage and the out-of-pocket costs, Boyd said.

“People are getting surprised after the purchase,” she said. “There’s a lot of education that needs to take place.”

Nationwide, a June report by the Robert Wood Johnson Foundation and the University of Pennsylvania’s Leonard Davis Institute of Health Economics noted that narrow networks make “consumers vulnerable to the financial burden” of accessing care from an out-of-network provider and that “the challenge of navigating between in-network providers increases as the network size decreases.”

“As a result, network size, even as a broad concept, is an important feature of a plan. Yet surveys and other anecdotal reports suggest that many consumers who selected narrow network plans largely on the basis of lower premiums were unaware of the network size of the plan they selected. Information on networks specific to specialty or geography is mostly non-existent,” according to the report.

As the use of narrow networks grows, calls have begun to rise for tighter regulations. Udow-Phillips suspects that some states may enact regulation around disclosure “so that there’s transparency around who’s in the network and who owns those networks to make it clearer to consumers,” she said.

The issue, however, did not specifically surface in the Michigan survey by the Center for Healthcare Research & Transformation.

“Consumers are saying quite dramatically that they are making their choices based on price and many of them do seem to be aware anyway that they are making some tradeoffs on the network,” Udow-Phillips said.

Part of the problem stems from the novelty of narrow network health plans and the learning that comes with introducing and marketing a new product, said Barkell of Blue Cross Blue Shield.

“The communication is a bit of a challenge and we’ve had some bumps in the road only because these are new sorts of products,” Barkell said. “We know we have to make sure every communication is clear across all of the stakeholders.”

Klobucar notes that regulators are paying more attention to how narrow network plans are marketed on public health exchanges, their benefit levels and network adequacy.
“You’re seeing a lot more scrutiny,” he said. 

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