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In 2001, progressives led the fight against restrictive health plan networks and drug formularies that were being introduced by managed care as a way to tamp down on costs. In 2010 they embraced these schemes as a Faustian bargain with insurers.
The compromise liberals struck was to pursue a mandate-heavy template on which all of the ACA health plans had to be modeled, and to embrace the narrow doctor networks and drug formularies as a way to pay for the costs of this regulation.
That compromise has implications across the entire healthcare market.
Progressives have made the concept of narrow networks and closed drug formularies politically tolerable, if not trendy. Having garnered this political sanction to proceed with these restrictive plans, insurers are rolling out the same schemes market-wide.
Back in 2001, it wasn’t just liberals that rejected these same constructs, through political efforts that culminated with the introduction of a Patients Bill of Rights in Congress, that sought to prevent insurers from pursuing some of these restrictive practices. Consumers also firmly rejected these narrow provider networks, favoring Preferred Provider Organizations over more restrictive Health Maintenance Organizations. In choosing the PPOs over HMOs, consumers were trading away first dollar coverage for a lot of routine care in favor of more flexibility on which doctors they could choose. Under the ACA, they are forced to make the opposite bargain.
Some observers argue the insurance business tactics resulting in these narrow benefits are not unique to the ACA plans. In 2007, 15% of employer sponsored health plans also had narrow networks. But the rules embedded in the ACA made these very restrictive drug formularies and narrow provider networks almost an inevitable part of the ACA. And the embrace of these constructs as a part of the ACA will make these same arrangements far more prevalent across the entire market.
The rapid evolution of the employer-sponsored market, to mirror the kinds of narrow plans offered in the exchanges, is already underway. A March 2014 survey of more than 70 insurance companies, conducted by Wells Fargo, placed narrow networks among the top three employer product innovations in 2014, along with Accountable Care Organizations (ACOs) and increased wellness programs.
The construction of the exchanges also made it easier for insurers to fashion these restrictive networks and formularies. For example, the ACA allows health plans to bid for consumers on a county-by-county basis. That has led to the creation of networks of providers that are sometimes only countywide. These extremely narrow arrangements are being referred to as “Exclusive Provider Organizations.”
Nationwide, about half of the ACA plans feature narrow networks, according to consulting firm McKinsey & Co. On average, these narrow plans comprise about 17% fewer doctors than comparable commercial plans with broader networks.
Since many plans have limited or no co-insurance outside of their networks (or drug formularies) patients who seek care outside of these brief lists can be saddled with the full cost of their care. Under many plans, when patients are out of their networks, these costs don’t count against deductibles or out of pocket maximums.
Health plans are adopting these same schemes inside their commercial plans. Market pressures are one reason. Offering narrow networks is a way to cut costs and expand profit margins. But the commercial plans are also going to standardize their narrow networks across the ACA and commercial plans for practical reasons. It’s going to be too hard, in many cases, to service different lines of insurance business with significantly different networks. Once plans have these cheaper, narrow networks firmly established, they are going to use these same doctor rosters to service much of their Medicare, Commercial, and Obamacare business.
Having popularized these approaches, proponents of the ACA argue that increased regulation will prevent abuses. But there’s ample reason to believe that regulators will always be one step behind consumer hardships. For example, a cursory look at ACA networks shows that many ACA heath plans don’t include a single dermatologist capable of performing complex skin cancer surgery (known as MOHS surgery). It seems heath plans didn’t bother to distinguish between dermatologists that treat routine matters, and those that perform the specialized procedures.
Moreover, when regulators have tried to push back on the narrow networks, they have faced political obstacles. The architects of the ACA want to see more health plans offered on the exchanges. The number of health plans entering these markets has become a political yardstick by which critics and proponents measure the ACA’s success. So the law’s boosters are in cahoots with the health plans and the tactics that insurers say they must pursue in order to expand their health plan offerings.
When Washington State’s insurance commissioner initially denied certification to four carriers because their networks were too narrow, the Washington Exchange Board wanted the carriers included and pressured the commissioner to relent.
The sheer complexity of the ACA was borne of its aspiration to supplant Federal for state regulation of insurance and enforce a uniform benefit across the entire health care market. It required a lot of uncomfortable compromises. Perhaps none are more peculiar than the embrace of narrow doctor networks and drug formularies.
Progressives have abandoned consumer protections they long advocated in favor of their championing of Obamacare. It’s forged a peculiar reliance on once shunned insurance tactics. It will ensure that the narrow networks become standard fare.
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