Health Insurance Market Faces Restricted Provider Networks

May 19, 2016 - Last week, Scott Gottlieb, MD, Resident Fellow at the American Enterprise Institute, spoke in front of the House Committee on Energy and Commerce Subcommittee on Health delivering key information about certain reforms for the health insurance market that could make policies and medical care more affordable.

First, it is necessary to mention that health insurance costs have continually risen while the benefits and options available in insurance policies have declined, Gottlieb began. Narrow provider networks are taking hold while competition has declined in the health insurance market. It is unlikely that upcoming insurance mergers will help in that area, as the decline in competition is probable to continue.

It is possible that the Affordable Care Act has played a role in the general decline within the health insurance market due to completely changing the risk pools of health plans. Gottlieb went on to provide solutions to foster a more competitive, valuable health insurance market.

In the current market, there are trends to restrict provider networks and drug formularies in order to keep healthcare spending low. Nearly all silver plans have taken on closed formularies, Gottlieb found. Provider network adequacy is key for health plans to succeed in the market, according to a report from IDC Health Insights.

“High-visibility rulings have penalized over a quarter million dollars in fines to two commercial payers for ‘misleading’ consumers about their networks; and one judgment resulted in $15 million in rebates to customers,” Jeff Rivkin, research director for Healthcare Payer IT Strategies at IDC Health Insights, said in a public statement. “CMS has imposed significant fines for inaccuracies, and the newly-engaged state legislatures threaten new mandates and fines. Most importantly, the new consumer engagement paradigm is driving payers to finally pay attention to the directory and network ecosystem.”

While this takes place, the costs associated with medical treatment increases faster than the inflation rate. As seen with the upcoming mergers, consolidation has taken on a bigger part of the health insurance market as well as among hospitals. Legislative actions may have driven some of this consolidation, explains Gottlieb.

Consolidation among hospitals may lead to higher pricing, which health payers would need to manage. Additionally, the Resident Fellow described how healthcare efficiency and productivity often declines in the midst of consolidation among large hospital systems. Doctors often lack alignment with these hospital systems and thereby fail to succeed in overall productivity.

Currently, the way the health insurance exchanges and tax subsidies are structured has led to a narrow income demographic among those purchasing plans through the marketplace. This may be due to the subsidies being offered through the exchanges as well as the general rise in premium prices and out-of-pocket costs.

The risk pool that the Affordable Care Act has brought for the health insurance market is more expensive than previously predicted and this has led to a consumer population within a specific income range. As reported last year, the premium prices on the state health insurance exchanges are likely to increase steeply throughout 2016.

Those who purchased Bronze plans are expected to see a 12.6 percent rise in premium costs while Gold plan premiums will jump 13.8 percent, the Robert Wood Johnson Foundation discovered.

Gottlieb went on to discuss how current regulatory standards may be limiting health plan innovations or designs. More flexibility in regulatory mandates should be able to support market innovation and greater competition between payers. New health plan designs will be a key aspect of reforming the health insurance industry in order to resolve some of the issues regarding high out-of-pocket and premium costs.

He explained that the metal tiers were meant to simplify and streamline the purchase of coverage policies but has ended up limiting consumers’ options. Gottlieb also discussed some opportunities for reforming enrollment periods including providing incentives to guarantee consumers remain insured.

“We need to maintain some exemptions for people who confront some discrete challenges obtaining coverage during open enrollment periods. But carefully defined enrollment windows can also form a key element of rules that use incentives to encourage people to enter the insurance market and stay continuously insured, rather than relying on penalties to enable these same outcomes,” Gottlieb stated.

“I believe that protections for people with preexisting conditions could therefore involve rewarding continuous coverage rather than punishing lack of insurance. As we noted, one way to do this is for the federal government to extend the reach of a long-standing provision of law to ensure that people with preexisting conditions have access to coverage wherever they seek it. Under this approach, people who maintain continuous insurance coverage would be guaranteed access to coverage and protected against higher premiums because of a preexisting condition.”

Health payers would benefit by following some of the best practices outlined in front of the House Committee on Energy and Commerce Subcommittee on Health. The future of the health insurance market will depend upon how payers will address many of the challenges currently seen in the exchanges and health plan designs.

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