The Centers for Medicare & Medicaid Services' proposal to mandate broader provider networks in public insurance exchanges could have the unintended consequence of discouraging insurer participation, according to analysts at Moody's.
After concerns in states like New Hampshire and Maine over some providers being left out of plans available in new insurance exchanges, CMS is proposing a new set of network adequacy standards for 2015. Depending on how broad the requirements end up, they could be counterproductive to the goal of using high-quality provider networks to control costs, argue Moody's senior vice president Lisa Martin and public finance managing director Kendra Smith in a new briefing.
Under the proposal, first outlined in a summary of various proposed and final rules in early February, CMS would ask insurers selling qualified health plans for lists of all in-network and out-of-network hospitals, primary care, mental health and oncology providers to measure whether they offer patients "reasonable access" in their service areas. For essential community providers, CMS regulators are proposing extending the percentage required in a service area from 20 percent with to 30 percent, with limited exceptions.
"If CMS determines that an issuer's network is inadequate under the reasonable access review standard, CMS will notify the issuer of the identified problem area(s) and will consider the issuer's response in assessing whether the issuer has met the regulatory requirement and prior to making the certification or recertification determination," regulators wrote in a proposed rule.
That proposal comes with two implication, Martin and Smith wrote. On the one hand, it could be a boon to some not-for-profit hospitals taking a lot of Medicaid patients or academic medical centers trying to support their research and teaching programs. "Hospitals with a large share of low-income patients stand to benefit most under the proposal because it mandates the inclusion of certain essential providers that otherwise may have been excluded because of their higher cost structure," wrote Martin and Smith.
Among those providers with significant Medicaid revenue are several with varying financial foundations, such as Children's Hospital Los Angeles (rated Baa2, a moderate credit risk), Albert Einstein Healthcare Network (rated Baa2) and Loma Linda University Medical Center (rated at a slightly higher risk, Baa3).
On the other hand, for insurers, "this proposal could threaten the ACA's goal of providing affordable, lower cost healthcare through public exchanges," Martin and Smith wrote. "Forcing insurers to expand their networks will result in higher premiums to cover higher cost networks, discouraging enrollment particularly for the younger and healthier population," they argued. "If the trend were to continue, these products would eventually become unsustainable and insurers would leave the exchange marketplace."
In and outside of insurance exchanges, insurers have been turning to narrow or tiered networks as a way to reign in premiums and their rise has been controversial in some places. In New Hampshire, the lone carrier in the federally-run public exchange, Anthem, included 16 of the state's 26 hospitals in its network and has been facing something of a public backlash, with legislators considering intervening. In Indiana, UnitedHealth recently renewed a contract for two years with Indiana University Health after tense negotiations; the insurer, which has a 12 percent market share in the state, was hosping to charge the 20-hospital IU Health at a higher rate than other providers as part of its tiered network strategy.
While some patient advocates and provider groups have criticized plans with narrow networks for limiting consumers perceived or actual choices, creating patient travel hardships or carving out certain providers, the idea of narrow networks has garnered support outside of insurance circles -- only some think they need some better marketing.
Farzad Mostashari, MD, the former federal health IT czar, has called narrow networks "another example of good concept with horrible branding." Mostashari, now a Brookings Institution fellow studying accountable care, has suggested calling them "cohesive" or "coordinated" networks. And more than that, he argues, for narrow networks to work, they have to be transparent from the get-go, with consumers able to know which providers are in-network before they select a health plan.