- The new health plans offered in the Obamacare exchanges are going to be narrow network, no frills affairs.
- The private, commercial health plans will be conformed to match the benefits and networks offered in the exchanges.
- Faced with declining incomes, and higher out-of-pocket medical costs, people are deferring healthcare.
When it comes to the Affordable Care Act, even supporters are now grudgingly conceding an uncomfortable certainty. The new health plans offered in the Obamacare exchanges are going to be narrow network, no frills affairs.
Obamacare's exchange based plans will be a throwback to the 1990s style of restrictive HMOs. They will give you fewer choices of doctors and hospitals than the kinds of health plans currently sold in the private, commercial marketplace. The doctor networks that Obamacare plans use will resemble Medicaid plans.
But it doesn't end there. Pretty soon, these same bare bones health plans will also become standard fare in the commercial marketplace. You'll get them at work.
Obamacare has a lot to do with that, as well.
These narrow network health plans are the same kinds of restrictive schemes that eventually led to the development of the 2001 "Patients Bill of Rights" in Congress. That legislative effort ultimately failed. But watch for it to get resurrected.
This coming transformation of commercial health plans turns on a simple pragmatism when it comes to the business of health care.
The health insurers that service the exchanges are going to have to tap their exchange networks to service their commercial plans. For health plans, they will have no choice. It's simply too hard and costly for large, national health plans to maintain multiple networks to service multiple segments. Already, they maintain separate networks for their Medicare, Medicaid, and commercial markets.
In short order, the private, commercial health plans will be conformed to match the benefits and networks offered in the exchanges. After all, many of the Obamacare regulations on essential health benefits will already apply to the commercial plans. So will the deductible ceilings that are placed on the small group market.
This is precisely what happened when Medicare's Part D drug benefit was put into place. In a fairly short time, the formularies that were constructed to service the Medicare Part D drug benefit were imported into commercial health plans as well. Since 2005, the percentage of workers in an employer-based plan with the four or more tiers that's standard fare in Part D (from the start) has more than tripled.
It's simply a fact of business that the health plans are likely to maintain only a few flavors when it comes to the provider networks that they maintain. Keeping too many different arrangements, and offering too many different rates in the provider market, erodes a health plan's ability to compete on price and manage their costs.
This trend toward Obamacare style health plans at work is also a function of economics. Healthcare costs are going to start rising again. The principal reason costs have been held in check is the slack economy, and the advent of health plans that transfer more cost sharing to consumers. Faced with declining incomes, and higher out-of-pocket medical costs, more people were deferring healthcare.
But once the economy starts to recover, doctor visits will start increasing. As utilization increases, it will pressure private health insurers to skinny down commercial plans to mirror Obamacare. This is how they'll manage costs, especially in a market where Washington is encouraging them to adopt HMO style products.
The "Affordable Care Act" was designed to expand access to health insurance. Not to control costs. Everything that the legislation does to try and tamp down on medical spending is just a variant of capitation. Its goals are to transfer financial risk to providers. These schemes work at reducing spending. But mostly by reducing the amount of care that gets delivered. They are dependent on maintaining tight control over doctors. That, in turn, depends on contracting with narrow groups of doctors.
Boosters of Obamacare argue that these economic forces were long underway, and health insurance schemes would have shifted to these narrow network arrangements, eventually. Obamacare merely accelerated this transformation.
That's simply not true. Obamacare fundamentally remade the insurance product in this country, putting an emphasis on first-dollar coverage of routine primary care (through the creation of "Essential Benefits") while allowing health plans to skinny down their catastrophic coverage and move away from their PPO type products.
This was a deliberate reversal of Bush-era policies designed to fashion more "consumer-directed" health plans where people were exposed to more cost-sharing as a way to instill market-based discipline on demand, and therefore control costs.
The press was slow to see schemes taking shape as a result of Obamacare. Recent stories about the narrow network plans have been treated as news. It's not new news. It was inevitable from the very beginning. So is a similar transition for the employer-based health plans we get at work. Pretty soon, we'll all be in Obamacare.
American Enterprise Institute (AEI) Resident Scholar Scott Gottlieb, M.D. is a practicing physician. He previously served in senior positions at the Food and Drug Administration (FDA) and the Centers for Medicare & Medicaid Services (CMS).