In early March, Alex Szablya rushed her daughter to Seattle Children’s Hospital after the teenager talked about suicide. At the hospital, Szablya discovered her recently purchased LifeWise Health Plan did not include the premier children’s hospital in its network. Also not in their network: Any hospitals with adolescent inpatient psychiatric units. A psychologist, Szablya wasn’t taking any chances with her daughter’s mental health. “There was no other place to go for this kind of specialty,” notes Szablya, whose daughter was admitted to the hospital for a week.
LifeWise, a Premera Blue Cross plan, is one of three Seattle-area insurers excluding Seattle Children’s from their provider networks. Health insurance plans offered on Washington State’s new Health Benefit Exchange by Regence Blue Shield and Coordinated Care Corp. also exclude Seattle Children’s. (Coordinated Care is expected to list the hospital as a network provider beginning in May.) “The insurance companies are doing this to get around the costs associated with making sure everyone is covered,” says Szablya.
Several hospitals nationwide suddenly have found themselves excluded from exchange-offered health plan provider networks. Insurers say in order to offer affordable coverage under the Affordable Care Act’s benefits and coverage mandates, they need to limit the numbers of hospitals and doctors in their provider networks to control costs. Insurers claim they pick network hospitals based on quality and cost-effectiveness, but others wonder if price is the biggest factor.
“There is enough anecdotal evidence to say this is a trend,” says Matthew Eyles, executive vice president with Washington, D.C., consulting firm Avalere Health. “It is part of a broader strategy by payers to get ahead of the costs.” Excluding some of the higher cost settings, like academic medical centers, “is an easy mark,” Eyles says.
The impact of narrow networks has been small so far, as they are mostly associated with some new public exchange plans. “The bigger issue is what happens longer term? You could be looking at a much more significant impact,” if narrow networks spread to commercial and private exchange plans, Medicare Advantage and Medicaid managed care plans.
“Our biggest concern is wanting to provide quality care at an affordable price,” says Eric Earling, spokesman for Premera Blue Cross. The smaller network allows Premera to reduce premiums by “at least 5 percent” compared to their regular network offerings, says Earling, adding Seattle Children’s is “twice as expensive” as other hospitals for delivering non-unique services. He adds Premera provides a mechanism, prior authorization, so non-network hospitals that provide unique services can be covered as an network provider when required.
For hospitals, network exclusion can hit the bottom line, affecting patient referrals and declining volume, and increase costs. Patients going to non-network providers pay significantly higher out-of-pocket costs—sometimes the full tab—under many new ACA exchange plans. Hospital officials in some markets say if they don’t agree to significantly lower reimbursements, insurers are excluding them from networks. Hospitals fear narrow networks will expand into commercial plans.
“This is moving very rapidly out of the public exchange plans and into other products,” says Dr. Sandy Melzer, senior vice president and chief strategy officer of Seattle Children’s Hospital. For example, Premera has extended its narrow provider network beyond its exchange plans to its individual and small group offerings, confirms Earling.
Meanwhile, Seattle Children’s is working with Szablya and has appealed to LifeWise to cover the family’s claim as a so-called “single-case agreement” after providing care. Szablya says she is on the hook for half of the eventual bill, since her PPO picks up 50 percent of out-of-network care. Many exchange offerings, such as HMOs, don’t cover out-of-network care at all. Through late March, Seattle Children’s has filed more than 300 “single-case agreements” after treating patients whose health insurance plans have excluded the hospital. “This is not a viable plan for the long term,” says Melzer. “It’s stressful for families, it’s taking a huge amount of our doctors’ time…we’re spending hundreds of thousands of dollars [in administrative costs] and thousands of hours on this.”