NEW YORK -- Health insurers under pressure to keep premiums low are eliminating some hospitals from coverage in a cost-cutting strategy that threatens to freeze out centers that provide specialized care, limiting patient options.
Left out are hospitals such as Seattle Children’s, excluded from five of seven plans on Washington’s state insurance exchange. The hospital, which has sued the state to be included in more plans, is struggling to get paid for care given to about 125 children since Jan. 1, when the Affordable Care Act’s coverage took effect, said Sandy Melzer, the facility’s strategy officer.
In January, "we made the decision to see all the children," Melzer said by telephone. "Maybe we’ll be paid, maybe we won’t. It’s completely done on faith." If the insurers refuse to cover their services, the hospital will pick up costs that go beyond the standard deductible, he said.
The insurers’ strategy, outlined in a report last month by the McKinsey Center for U.S. Health System Reform, is an unexpected consequence as the 2010 Patient Protection and Affordable Care Act, also known as Obamacare, kicks into gear.
The law puts pressure on premiums by requiring insurers to "broaden health benefits, restricting how much premiums can vary with age and adding a new health-insurance tax," said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, or AHIP, a Washington-based trade group.
Narrow network plans pit two basic consumer demands against each other. On one hand, patients want choice and the ability to seek care at whichever hospital can best treat their condition. On the other hand, consumers want affordable premiums at a time when health-care costs are rising nationwide.
U.S. health spending is expected to grow more than 6 percent this year to $3.1 trillion as the health-care overhaul takes full effect and millions of Americans gain insurance, according to the Centers for Medicare and Medicaid Services. The average premium for family coverage has increased 80 percent in a decade.
Insurers say one way to help lower costs is to select medical providers who deliver quality care at a low price. This week, the Health and Human Services Department said insurance plans may be required to include at least 30 percent of "essential community providers" in each county in 2015 from 20 percent this year. That means about 38 percent of current plans would need to broaden their networks, according to the McKinsey study.
For now, the restricted plans have put higher-priced specialty hospitals, as well as small hospitals in markets dominated by a single insurer, in line to be cut from insurer networks. Feeling the pressure, they are pushing back.
Seattle Children’s Hospital, for instance, sued the Washington Office of the Insurance Commissioner in October for "failure to ensure adequate network coverage" after its exclusion from five of seven plans offered on the state’s insurance exchange. The hospital, which saw 351,000 pediatric patients in 2012, asked the commissioner to reconsider its standing with four of the plans.
In a Jan. 29 court filing, the state responded that "nothing in the law dictates inclusion of a specific provider, regardless of their preeminence or sympathetic patient base. So long as issuers meet the legal standards for adequacy and covered services, the OIC does not manage their business arrangements for them."
The costs of carrying the hospital were unacceptable, BridgeSpan Health Co., one of the insurers at the center of the case, said in a filing. "If the hospital’s position were accepted," the company said, it would require insurers to pay the hospital whatever it wants to charge.
The hospital, meanwhile, counters that the uniqueness of its services and the training required by its doctors to carry out patient care deserve more compensation.
Insurers routinely make decisions on whether to pay for out-of-network care. Premera Blue Cross, one of the insurers that excluded Seattle Children’s, has responded to 21 applications for reimbursement from the hospital, approving 13 and rejecting eight, Melzer said. In the wake of the new health law, the hospital has added three staff members to handle reimbursement applications, he said.
Specialized hospitals aren’t the only centers struggling with the newly narrowed networks. They also affect smaller facilities in markets dominated by a single insurer, further limiting consumer choice.
In New Hampshire, Anthem Blue Cross Blue Shield is the only insurer selling its products on the state’s independent exchange. They cover 16 of the state’s 26 hospitals in their reimbursement network.
Anthem president Lisa Guertin says the insurer designed its exchange plans in response to customer surveys: "The message that came back was clear and compelling," she said. "They would trade off the full breadth of access for the price point."