Insurers’ Latest Dodge to Not Cover You when You Need It: The Incredible Shrinking Network
Today’s must-read Seattle Times article by Carol M. Ostrom and Amy Snow Landa (interactive graphic here and comparison table here) prompts me to write about a huge problem with American health insurance that I’ve been banging against quite personally in recent months.
Excerpts below give an idea what an important article this is. My thoughts:
Insurers are actively eliminating must-have hospitals from their networks, while imposing unlimited out-of-pocket charges for out-of-network services. If the provider you need (a pediatric or major-trauma hospital for instance) isn’t in your insurer’s network, you could face financial ruin even though you’re insured.
I’ve been deep in the individual health-insurance shopping game recently, shopping for myself in Washington State and for my 22-year-old daughter in Illinois. I even built a web app to compare total costs of different health plans, because there’s really no way to compare them without such a tool.
It’s incredibly complex, with all sorts of interacting variables to evaluate. I can’t imagine how someone without my analytical skills (and time to use them) could even begin to do a good job of it — protect themselves effectively and suss out the best deals to do so. Most would have to throw up their hands and throw a dart.
To be a smart shopper in this market, you have to be very smart, and have lots of time on your hands.
That pretty much describes me — the Republicans’ dream shopper, out there driving down insurance prices by comparing and carefully evaluating all the competition and choosing the best deal.
But even I have been completely flummoxed by one big issue: how do I evaluate the networks of providers offered under different insurers and plans? Sure, I can look to see if my doctor’s covered. Great. Big deal. But what if I have a major auto accident? Is Harborview (Seattle’s top-flight regional trauma center) covered? How about Children’s Hospital, our pediatric mecca? (Not an issue for me these days, but…) The Swedish Hospital system? (Top-rated for ER intake times, the place I would go for a medium emergency.) Seattle Cancer Care Alliance? (This is the outfit you’re gonna want if you face that horror.)
One and only one insurer in Seattle covers all those providers in-network. Most cover none of them.
Ostrom and Landa have done the legwork for us here in Seattle. If you’re elsewhere…sure: you can evaluate this — by going to every single insurer’s site, figuring out which of their often-multiple networks a particular plan supports, then successively searching those networks for all the possible providers using their little web tool, one provider after another, one insurer after another, and building yourself a table.
It’s basically like playing Battleship.
Realistic? Even if you could predict, in advance, what providers you might need someday (and you’re savvy enough to know which providers in town are important), we’re talking hours of work to check whether each plan covers them.
Here are the crux paras from Ostrom and Landa’s article:
The Seattle Times asked the seven insurance companies selling individual policies in the exchange in King, Pierce and Snohomish counties to list their in-network hospitals.
The results show that only one — Community Health Plan of Washington — includes Seattle Cancer Care Alliance, which offers treatment for some of the most complex cancer cases in the region.
Four of the seven insurers do not include the University of Washington Medical Center or the UW’s Harborview Medical Center — which has the state’s only Level 1 trauma center and burn unit.
Community Health includes every major hospital in King, Pierce and Snohomish counties, but is the only exchange insurer that does.
By contrast, Premera and its subsidiary, LifeWise Health Plan of Washington, include many major hospitals, but not the largest Seattle-area hospitals in the two major medical systems — Swedish and UW Medicine.
Let’s be very clear here: Premera and Lifewise, two of the state’s biggest insurers, provide in-network coverage for none of the important hospitals I listed above. Not Children’s (pediatric). Not Harborview (major trauma).
Meanwhile many, most, or all of their plans have no limit on your out-of-pocket costs for out-of-network providers. If you have a serious illness or injury, you could be financially ruined even though you’ve got insurance.
This part really, really pisses me off:
Coordinated Care CEO Dr. Jay Fathi said the company would use “single-case agreements,” which he likened to an invoice or a bill. The hospital sends the bill to the insurer, who pays it, a system he said functions “fairly smoothly.”
Children’s officials say such agreements are quite rare and are generally limited to patients who are out of network because they live outside the local area. Resorting to single-case agreements, they said, would likely delay care for patients.
In other words, “Trust us. We’ll cover you if you need it.” (Yeah, and I’ve got a bridge for sale.)
This also points out that exposure to out-of-network charges, traditionally much more of a problem in rural counties, has now come home to urban dwellers. Seattle has traditionally been seen as a really great place to get sick — great providers with ample access.
That’s no longer true if you’re buying individual health insurance.
Cross-posted at Asymptosis.
First, I can’t believe there has been nothing in the national news regarding United’s latest move for their Medicare Advantage product Secure Horizons. They are dumping by the thousands all sorts of providers. Group or otherwise. The largest cataract outpatient provider Koch is out in RI. My appointment with the local senior center is 12/3 for my parents as mom’s cardiologist is out. The local news has gotten no answers from United. Supposedly it will allow tighter control on the cost and better care. Read that as more flow to fewer docs getting a fee schedule cut. Yeah, that’s going to produce better care.
It is what you are writing about here.
Second, you are butting up against the fallacy of the neoliberal/conservative model for health care. As I have noted here many times. Health care is not insurance. Insurance is only a middleman. But, the discussion has been moved such that no one even thinks twice about the conflation of getting the work of the provider to the patient thus health care being provided with getting the money to the insurer as the proxy for the provider if you are the patient and the proxy for the patient if you are the health care provider.
Choice?!!!! It’s a nice sounding concept until one realizes that there is no choice to be had in achieving access to care. You either have it or you don’t. That we set up this “market place” of choice of how you will get to have health care is just whacked! I mean, we have now codified into law a class structure. It’s even spelled out in the typical color of class: gold, silver and bronze.
This law has codified in law what I described in previous posts: The 180 degree turn of our economy from one where those who could afford to take the least risk were supported and those who could afford to take the most risk were not. It was a sliding fee scale structure we had set up in society. Now we do just the opposite. Those who can afford the most risk are rewarded with societal reduction of cost of those risks. Reward being the key word as in winning the economic security game.
Does anyone really think the people who can least afford to pay for care are going to pay the higher premiums of the silver and gold plans? Are those who can least afford the cost going to choose the lowest deductibles and copays? Even with subsidies, they do not get to realistically choose the gold. One has to “win” the gold in this system.
Yes, this system does not prevent bankruptcy from what is a known risk of life for everyone.
Completely predictable.
Welcome to Obamacare. It will get worse.
Jane McAlevey in her book Raising Expectations (and Raising Hell) tells that out-of-network pricing is a gold mine for Las Vegas hospitals. 300,000 visitors from L.A. every week and 44 million from everywhere a year — may mostly be out-of-their-systems — allowing Vegas hospitals to charge what they wish; no pesky negotiating with insurance companies.
She got hospitals there organized starting in 2004 — She says for-pay hospitals there have the worst outcomes. Want best care: go to county. She says before Reagan there were no for-profit hospitals in the US. Still not in many states back east — banned in NY, MA, etc. She says: ever hear of someone going to Vegas for best treatment? 🙂
Ultimate answer to most American market (and political) inequities: legally mandated, sector-wide labor agreements (centralized collective bargaining). Let’s at least start a national discussion on it. Don’t be afraid that the path isn’t all laid out for tomorrow. Nothing else will ever work.
Hmmmm:
Many policies (or at least Employer types) have a clause in them concerning out of network emergency care. They cover in such instances. I was covered on several different occasions when the providers were out of network and the hospital was in network.
STR:
Why is such issue the fault of the PPACA and not scheming healthcare insurance companies??? They are the ones scamming the market place.
run’s comment is dead on. Insurers restrict approved providers all the time and totally independent of the ACA. Perhaps a legislative fix would be in order but with a Republican House determined to undermine the ACA, it won’t happen.
What, rustbelt? It’s completely predictable that the man in the Seattle Times article, Kenneth Pick, who had a heart attack AND cancer during his years working for an employer that provided group healthcare insurance and is now retired with more than four years to go before Medicare kicks in, and his retired wife, about the same age, who might have had a hangnail or something at sometime in her life, can GET healthcare insurance that covers them both for just about everything? My thought, exactly!
Their complaint isn’t with the ACA, rusty; it’s with the individual-market insurance companies. There’s nothing in the ACA requiring that couple (or anyone else) to use the state marketplace rather than just phoning Blue Cross or United Healthcare or Aetna or whatever and asking what plans are available to them OUTSIDE the marketplace–and what the cost would be for, say, a 60-year-old heart-attack and cancer survivor. A plan that, y’know, would cover him for treatment for, say, another heart attack or a cancer relapse, at a hospital and with doctors of his choice. And that would cover his wife if she gets another hangnail.
What a ridiculous comment. It’s going to get worse? Worse than what, exactly, rusty? I assume you don’t mean, than the pre-ACA situation. So, do tell.
@denis:
Did you see this one?
What I don’t understand about the couple featured in the Seattle Times article is, what is this couple doing NOW for coverage? They’re both retired, and unlike most of these Obamacare-done-me-wrong stories, this one compares not their current individual-market plan with the what’s available on the state marketplace, but instead their coverage from a group employer-provided plan that they had had a while back. There’s no mention of what how this couple is getting insurance NOW, so there’s this mysterious disconnect in this article. Are they using COBRA and paying exorbitant premiums to extend their coverage–an option that does not go on indefinitely? This lady was stunned that the individual-marketplace plan from the insurance company that provided their back-when employer-provided group coverage wasn’t the same as the employer-provided group coverage. So presumably they have SOME insurance currently that does–or at least that’s the implication. But from where? Where is this wonderful individual-marketplace insurance for this 60-ish retired couple, one member of who is a heart attack and cancer survivor coming from?
Steve, any thoughts on that?
Should say: “… one member who is a heart attack and cancer survivor, coming from?”
Yes Rusty is still insisting on blaming dysfunction several decades in the making in the individual insurance market on the upcoming introduction of Obamacare.
I like STR, and on balance he has been very nice to me on most issues over the years since he and I washed up at Angry Bear. But he has always been heavily invested in the failure of ACA. That is the issue that brought him to the fore at AB and which offered him a platform as a semi-regular contributer. Save the Rustbelt has been the sane voice of the anti-Obamacare argument and has confidently been predicting its failure right here on a consistent basis since 2009.
Which would make any signs of its being succesful in its aims a little difficult for him to swallow. Well Hell I sympathize, I invested quite a bit in the success of the Social Security Low Cost Alternative back in the day. Why it was OBVIOUS in 2004 that Social Security would self-fund without any changes in the revenue stream. Ooops, I had to back off that one and embrace the Northwest Plan.
Rusty is faced with potentially the same kind of adjustment. His whole line of argumentation and much of his reason for being taken seriously here is bound up with his mostly rational projections of failure for Obamacare. As a result any semblance of non-failure HAS to sting.
Join the club. But blaming ACA for a pattern of restricting access to out of network providers that has been going on for a couple of decades is not going to work for you here. I mean Big Insurance has been getting between Patients and their potential Doctors since forever. It is not like Obama thought up the concepts of ‘recission’ ‘lifetime limits’ and ‘preexisting conditions’ that are driving much of this provider restriction.
We’re based in Washington State too, so we’re familiar with the situation. One of us is on Medicare, but the other has been buying a policy from one of the insurers not in the exchange. Interestingly, the costs of the non-exchange policy are about the same as a similar exchange policy. The two big differences are that the non-exchange policy is not eligible for a subsidy, and there is a cap on out of network spending.
The insurers are responding to the incentives and disincentives in ACA, and presumably the Obama administration knew that would happen (or in the alternate turned loose a program without knowing what would happen)..
Employers are looking at a weak labor market and are gladly shifting costs to employees.
The real story of ACA is not healthcare.gov, that will blow over, the real story is the realignment of the provider network and and the cranking down on services and reimbursements.
Like chess, think several moves ahead. The administration has.
Bruce: But blaming ACA for a pattern of restricting access to out of network providers that has been going on for a couple of decades is not going to work for you here. I mean Big Insurance has been getting between Patients and their potential Doctors since forever.
I get that. I did not read Rusty’s comment as Bruce and Bev but that might be my own prism getting in the way.
Was it unreasonable to think that a law constructed to bend the cost curve in a way that also reduced the “surprise” factor of what is and is not covered would have dealt with “a pattern of restricting access to out of network providers that has been going on for a couple of decades…”
Steve article for me was about his findings, not so much the Seattle Time’s article. Is it unfair to suggest that the PPACA is not as easy a shopping experience as one has been lead to believe such that one may not fully realize what they have purchased until they use it unless one spends such time as Steve?
Is it unreasonable to expect the shopping experience of “go to the exchange and choose the plan that you like the best for your situation” to be less encumbered in getting to the point of fully knowing what one has just purchased than what Steve is experiencing? Was the ACA not sold as being so simple?
Do we the public not have a consensus as in the legal concept of the “common man” as to what one is saying when they talk about having health insurance coverage and thus healthcare? Was this consensus a consideration, is it found within the language of the ACA?
The reason the ACA is to blame is because it is the ACA that created a captive market of both producers (insurance companies) and consumers (individuals).
The producers know a few things now:
1) individuals will be forced to purchase their products
2) their products are specifically designed by an outside force, the government
3) the government will subsidize the consumer’s purchase of their product
4) insurers must spend what 80 or 85% of their premiums on healthcare
In such an environment it is a race to the bottom in terms of care quality. Quality and efficiency are no longer important as it won’t make the insurance companies more money. The only thing that will increase nominal profits is more revenue. The insurance companies have the belief that the lowest cost insurance will get the most customers, leading to the most revenue, which leads to the most profits. Why is this so? Well because if an insurer collects 10M in revenue they have to spend 8.5M on healthcare leaving $1.5M on operations and profit. But if they can get to $100M in revenue, then they have $15M for operations and profit. Doesn’t matter what kind of care they provide, they have to spend the money anyway.
To get to the lowest price, they offer less medical services. If you don’t like it, oh well, the ACA forces you to buy insurance and the government will help you do so with a subsidy.
If you disagree with the insurance companies’ methods, set up an insurance company with the best coverage available for all people, price it so you make the average 3-4% that insurance companies make, and see if you can sell to enough people to stay in business.
Yes, rusty, the insurers are responding to the incentives and disincentives in the ACA, and presumably the Obama administration knew that would happen (or in the alternate turned loose a program without knowing what would happen). The problem with your comments are that they state, erroneously, that the ACA incentivizes the narrowing of provider networks in the individual-coverage market and that the insurance companies were downright clairvoyant in predicting the enactment of the ACA years, even decades, before that statute was enacted and therefore got the idea of narrowing provider networks from the ACA. The claim is not only false; it is downright bizarre.
What the ACA does is deny insurance companies the option to decline acceptance of individuals for coverage because of preexisting conditions, and it bars cancellations of policies because of illness, and it bars annual and lifetime caps. I assume this is what you mean when you say that the ACA incentivizes the narrowing of networks. So, yes, it’s a tradeoff! The couple featured in the Seattle Times article can actually GET health insurance, despite the serious preexisting medical conditions that one of the two of them has.
The presumption inherent in the ACA was that direct competition among insurance companies would REVERSE the LONG-ACCELERATING trend toward narrowing of provider networks for individual-policy coverage. That may well occur, once the issue becomes well-known among the public. It’s a safe bet that today, throughout Washington state, people are flocking to the website of the one insurance company that the Seattle Times article said has plans that include access to all the main hospitals and physician groups, and that people who have not yet signed up for a policy from another insurance company will be less likely to do so. The free market in action!
But also, almost certainly, there will be movement, in individual states and (presumably) in Congress, almost exclusively, of course by Democrats, to enact laws that address this situation if the market itself does not do so very soon.
Finally, rusty, I do recognize that it is a major cottage industry right now to claim that the ACA is responsible for things that the ACA is not responsible for. Even major mainstream news media organizations such as the New York Times, the Washington Post and Reuters participate in this, the Times and Post via bald misrepresentations of fact, or deeply misleading ones, in op-eds by regular columnists or freelancers. In the case of Reuters, I have in mind one instance about two weeks ago in a report by a reporter that erroneously and incoherently blamed the ACA for something in particular. I had planned to write something on AB about it, so I saved the article to my computer hard drive, but when I checked back last week to get the URL for the article, the article was missing the ACA allegation–which was nice, but the fact that the article was corrected should have been noted. I had originally read the article on Yahoo News, after clicking on a headline blaming Obamacare for whatever.
I certainly know by now that Obama will make no effort to point out these errors, but I do think that some congressional Dems and the DNC itself are catching on that they must pick up this slack and concertedly respond nationally to these misrepresentations of fact.
I’m just sort of curious, Scattergood. To get to the lowest price, they offer less medical services, you say. Except that that is false; the ACA requires that policies cover MORE medical services than the current mini-policies cover, so I’m wondering where you’re getting your information from. And the statute requires that people who cannot now get coverage at all because of preexisting conditions will be able to get coverage as of Jan. 1. So I’m assuming, correctly, I’m sure, that you’re angry because you can afford to pay your medical bills for emergency room treatments if, say, you’re seriously injured in a car accident or have a heart attack, and therefore wouldn’t stiff the hospital and doctors and won’t push your medical bills onto the public.
Beverly,
I am curious, do you understand the notion of marginal benefit or marginal cost?
I am neither angry nor not angry. And you don’t know if I can or cannot pay for my medical expenses, so stop making an ass of yourself and assuming things.
Further, emergency rooms are required by law to provide healthcare to those in need. Also, bad debt by individuals in the healthcare system is roughly 3% of all healthcare costs, a relatively low number. But the kicker is that 1/2 of that amount or 1.5% of all healthcare expenditure that is bad debt is due to those that are insured.
It is clear you don’t seem to understand basic economics. All insurers must provide increased coverage, but in order to maximize revenue they have decided to do so by offering the lowest premium to meet that artificial and invasive minimum that the government set. So they limit the number of providers within the plan, thus reducing all sorts of costs and offering a ‘minimum’ product for a marginally lower price than their competitors on the hope that by doing so they will increase gross income which is the most efficient mechanism to increase gross profits.
You can have whatever opinion you want, but try to base it in some facts please.
scattergood:
Lets start here:
“emergency rooms are required by law to provide healthcare to those in need”
Hmmm; it is my understanding, ERs are only required by law to “stabilize the uninsured” before they kick them out the door. Hospitals do not and neither do doctors. It would be good if you explained the entire law. ERs are not required by law to do more than stabilize the uninsured.
“emergency rooms are required by law to provide healthcare to those in need”
I believe you mean by this that hospitals must spend at least 3% of operating revenues on the uninsured (4% in some states) in order to qualify for non profit status. In which case, the Federal government subsidizes non profit hospitals for taking care of the uninsured. Since the uninsured typically pay taxes; in a manner, they are also paying for their own care. Your 3% of all healthcare expenses is misleading and untrue in the manner in which you state it.
“But the kicker is that 1/2 of that amount or 1.5% of all healthcare expenditure that is bad debt is due to those that are insured.”
Yes of course, the kicker is that many of the insured are covered by policies that often have exclusions, cover the minimum, and often leave the insured with more than what they can afford to pay. They are the McDonald plans or Newspaper plans which provide the most minimum of coverage. At least the PPACA provides for the maximum out of pocket amount at ~$6,000 for individuals and ~$12,000 for families.
Insurance has little to do with economics. While it is true some companies are offering narrow networks, states are resisting such networks and are forcing companies to offer more. It will change as their behavior will force Medicare for all or Universal healthcare and put them “mostly” out of business. Rather than critique the knowledge of others, it would serve you well to explain your premise in a clear and articulate manner.
I have no idea what your argument is here, Scattergood, because the facts you recite sure as hell don’t support your claim in your first comment that the ACA reduces people’s insurance benefits.
You’re right about one thing, though: that I don’t know whether you can or cannot pay for your medical expenses. My statement that I presume that you can was–obviously, I thought–facetious, but it doesn’t surprise me that you didn’t catch that. A hallmark of rightwing blatherers, I’ve noticed, is that the concept of facetiousness just isn’t something they grasp. Another hallmark: that they’re constantly changing their argument while pretending that they’re just supporting their initial one.
Beverly,
Well, I never claimed the ACA reduced insurance benefits, it clearly increases the minimum benefits for insurance plans. What I have claimed is that the ACA is at fault for setting up the rule set by which reducing the number of providers is a reasonable behavior for by doing so, under the rules of the ACA, they have the best chance at increasing their nominal profits.
What I have noticed of libtards, since name calling is something you brought up I am happy to go with it, is the inability to actually deal with facts that get in the way of the point you want to make. Also people like yourself descend into name calling and putting words in people’s mouths since you can’t actually argue the facts.
You have not, nor can you, actually dispute what I facts I have asserted, so you claim I am changing the subject, or call me a right wing blather. Nice.
Sigh . . .
“ACA is at fault for setting up the rule set by which reducing the number of providers is a reasonable behavior”
The PPACA does not have a rule, which suggests such. What healthcare insurance companies have done is taken advantage of a loophole to which many states are resisting their usage of to limit the numbers of providers.
“To get to the lowest price, they offer less medical services.” Hmm. and to think I thought you meant by that that the ACA reduced insurance benefits. Silly me!
Quality and efficiency are no longer important as it won’t make the insurance companies more money? Quality and efficiency are important NOW, as it makes the insurance companies more money? Quality, being … what, exactly? don’t know what you have in mind. But I do know what you mean by efficiency: rescinding policies once a policyholder gets sick, prohibiting access at all for people with preexisting medical conditions, annual caps, lifetime caps. Definitely efficient, although I have no idea why this would translate into attracting more subscribers–which I have to assume is what you’re claiming, since your main gripe with the ACA is that it removes the incentive to provide good coverage and service and therefore attract more subscribers and make a profit. Except, of course, their profits now are in direct inverse relation to the quality of service and the actual extent of coverage.
I certainly agree with you that the only thing that will increase nominal profits is more revenue. And so do they. If you get my drift, although you probably don’t. And then there’s the fact that the definition of “nominal profits” IS revenue, so what exactly is your intended point?
Whatever downside there is to the ACA, Scattergood, it most certainly is not that the statute will remove current incentives to provide quality and, um, efficiency. The statute, of course, BARS the current form of insurance-company, um, efficiencies; that’s its very purpose. Your claim is downright bizarre. You seem to be confusing healthcare insurance with auto manufacturing.
Ok, I will go really slowly as you seem to have some basic reading comprehension and economic ignorance problems:
1) What is Insured vs. What Medical Providers are Covered: You can insure for chiropractic care and have one chiropractor who will be on the provider list for the same insurance company. Covered services and medical services are two different things.
2) I suggest actually read a dictionary. Efficiency = “accomplishment of or ability to accomplish a job with a minimum expenditure of time and effort”, or delivering the highest quality services at the lowest cost possible.
3) The ACA negates the value for insurance companies becoming efficient because it mandates a minimum proportion of their premiums be spent on medical care. Let’s say prior to the ACA you collected $10,000 in premiums and spent $8000 in medical care. Well after the ACA you have to spend at least $8500 in medical expenses for that $10,000 in premium. So attempting to be efficient has a floor for every $10,000 in premium. If you are more efficient it doesn’t matter, you have to spend anyway. Thus the only way to make more money is to get more clients because increasing efficiency in the delivery of medical care won’t make you more money. To get more clients, the insurance companies have said, ‘hey let’s lower the premiums to get more people to buy our stuff since we have to spend the same proportion of revenue on medical expenses anyway’. So they cut service providers while increasing the range of services mandated. This is why the ACA is at fault, it set the rules. Don’t hate the player, hate the game.
I hope that was sufficiently simple for you to understand, I am not sure how much more basic I can be.
scattergood:
Oh please, what you utter is nonsense.
“the insurance companies have said, ‘hey let’s lower the premiums to get more people to buy our stuff since we have to spend the same proportion of revenue on medical expenses anyway’. So they cut service providers while increasing the range of services mandated. This is why the ACA is at fault, it set the rules. Don’t hate the player, hate the game.”
The healthcare insurance companies are scamming the individual insurance market, the same as you with your explanation. There is nothing or any rule forcing an insurance company to offer fewer providers. They are doing it on their own to maximum profits the same as they did with exclusion of certain potential insured to only take on the healthy at higher rates. There is nothing within the PPACA suggesting they should do such or preventing them from doing such. The rule is self imposed.
Oh please by the way, move as fast you wish with your lies and misinformation.
Run,
I would like you to explain the following from “Medical Loss Ratio Requirements Under the Patient Protection and Affordable Care Act (ACA): Issues for Congress” written by the Congressional Research Service:
“The 2010 Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) requires certain health insurers to provide rebates to their customers for each year that the insurers do not meet a set financial target called a medical loss ratio (MLR). At its most basic, a MLR measures the share of a health care premium dollar spent on medical benefits, as opposed to company expenses such as overhead or profits. For example, if total premiums collected are $100,000, and
$85,000 is spent on medical care, the MLR would be 85%. The ACA sets the minimum required MLR at 80% for the individual and small group markets and at 85% for the large group market. In general, the higher the MLR, the more value a policyholder receives for his or her premium payment. Congress imposed the MLR in an effort to provide “greater transparency and accountability around the expenditures made by health insurers and to help bring down the cost of
health care.” Insurers that fail to meet these minimum standards must provide rebates to policyholders.” (http://www.fas.org/sgp/crs/misc/R42735.pdf)
Might that mean that, oh I don’t know, the insurance companies must spend money on healthcare or return it? Might that impact their profits on both a gross and marginal basis? If not why not?
Scatter:
Non sequitur point, the discussion is not about profits. It is about your implied rule that the PPACA imposes on health insurance companies to narrow the provider base. There is no rule for such and healthcare insurance companies are doing it on their own. Keep to the topic scatter and do not wander.
Run,
OMG a private firm trying to maximize its profits! Wow, that is totally shocking! I can’t believe that it is happening!
You obviously don’t know the first thing about business, economics, or creating value. If you think you can do better, then go for it. Create an insurance company, offer the products that you think are superior, and do better than all of those evil insurance companies.
Scattergood:
Like Bev said, you are changing the discussion.
Where is it a rule in the PPACA for the insurance companies to narrow the provider base? There is no rule saying they have to narrow the provider base. Keep to the topic.
Scattershot, I mean Scattergood, are you seriously claiming both that a problem with the ACA is that it forces the insurance companies to spend more money than they’d like on medical payments AND that a problem with the ACA is that it removes current incentives (such as they are) for insurance companies to provide QUALITY, including access to broader provider and hospital networks? How exactly does THAT work? How exactly does does forcing insurance companies to spend more money on healthcare cause insurance companies to NARROW provider and hospital networks to save money?
We get it, Scatter. You make two conflicting arguments, and alternate between them depending on which one of your conflicting arguments has just been knocked down. Cute tactic. A bit transparent, but cute.
Efficiency = “accomplishment of or ability to accomplish a job with a minimum expenditure of time and effort”, or delivering the highest quality services at the lowest cost possible. The highest quality services being rescinding policies when the policyholder gets sick, denying service of any quality at all to people who have preexisting medical conditions, and annual caps and lifetime caps on even low-quality service. Merriam-Webster’s leaves out that part of the definition, so I checked the Insurance CEO’s Efficiency and High Quality Manual. It’s in there.
I don’t expect you to actually say what you think the job to be accomplished by insurance companies with a minimum expenditure of time and effort IS. But it’s unnecessary for you to specify it. The job is providing as little actual coverage to policyholders as possible. That’s a strange definition of “quality.” But, whatever….
OMG a private firm trying to maximize its profits! Wow, that is totally shocking! I can’t believe that it is happening! By having to spend 80% of its profits on the service it sells to people and narrowing the provider and hospital services in order make more profits! Or is it, to spend the full 80%? I’m confused. It’s one or the other, but I’m not sure which. Oh, wait; it’s both! Houdini Blue Cross!
Run obviously doesn’t know the first thing about business, economics, or creating value? I guess that’s why he’ll never be CEO of Houdini Blue Cross. He sillily thinks rational thought matters in business, economics, or creating value; he thought it was the first thing to know about business, economics, or creating value. But he was wrong. The first thing about business, economics, or creating value is throwing around phrases like business, economics, and creating value. Net time he’s over in China and Thailand representing the multimillion-dollar company he works for, they’re sure to take advance of his misconception about business, economics, and creating value.
Run,
Are you really that stupid? I never said there was a rule that made the insurance companies reduce providers. I said that the ACA created rules and an environment in which reducing provide can and does make sense. Or as Bev put it “insurers are responding to the incentives and disincentives in the ACA”. Now she doesn’t see the incentives and disincentives as I do, but at least she understand that that is what we are talking about.
scatter:
“Well, I never claimed the ACA reduced insurance benefits, it clearly increases the minimum benefits for insurance plans. What I have claimed is that the ACA is at fault for setting up the rule set by which reducing the number of providers is a reasonable behavior for by doing so, under the rules of the ACA, they have the best chance at increasing their nominal profits.”
Seriously, you should be more careful with what you commit to print. There is no such rule or rule set in the PPACA forcing Healthcare Insurance companies to reduce providers.
Bev,
You clearly have some reading and logic problems, and/or like most liberals don’t understand the basics of economics.
Again spending on medical care by insurers is a MARGINAL ISSUE. the statute doesn’t require them to spend more money nominally, but more money marginally. Again going really, really slowly for you:
Before the ACA if a company collected 10K in premiums they could try to be as efficient as they could and capture any and all savings they were able to create.
After the ACA that is not the case. So which is better for them in an ACA world:
1) 100 customers paying 10K apiece in premiums of which they have to by statue pay $8500 in medical expenses and rebates
OR
2) 150 customers paying 8K apiece in premiums in which they have to by statue pay $6800 in medical expenses?
I’ll even do the math for you:
100 x $1500 = $150,000 in gross profit
OR
150 x $1200 = $180,000 in gross profit
I am hoping that even you can see that $180,000 is greater than $150,000.
So, given that the insurance companies now are marginally disincented from reducing expenditures on a per person basis, they are trying to offer the lowest service plans possible in order to increase the number of clients since the per client profit is capped.
At least the whores in Nevada like ObamaCare. That’s gotta be worth something.
http://lasvegas.cbslocal.com/2013/12/02/legalized-prostitutes-at-nevadas-bunny-ranch-back-obamacare/
Late to this game, and the thread is probably cold, but here goes. Maybe I will put up a post.
Side stepping the previous conversations, because there appears to be some cause and effect issues as well as oversimplifications:
The central one here is cause and effect….the ACA impacts but does not cause, may accelerate…trends discussed in the thread have been happening at an accelerating pace well before ACA, so if you were to argue it all started with ACA then that is inaccurate. How to separate out the complexities of pricing, insurance, actual services, and who the main power players were before ACA is involved. How ACA affects these trends and business practice might be a better paradigm, but does not attract many readers. Rusty hints at trends but so far has not really explored them in posts…frustrating since he probably knows a lot…but he also knows the ACA is hardly the cause of many, although it adds to the current flailing about by all players.
The second point is that the medical system delivery of services and pricing environment is hardly an efficient market, or one that is controlled by insurance companies. Insurance is being used as a proxy and attempt at leverage, but insurance companies in many states hardly dictated pricing, even though they are mainly monopolies instate. Insurance companies might be power players, but only among many. Given that medical inflation outpaced overall inflation by significant spreads hardly boded well for the system….who in the individual market could afford 18,000/yr for a family plan (not a Cadillac plan btw). But it was quite evident that many insurance companies were not spending on medical services, in the parlance of the thread equivalent to .70 and such on service, .30 on other….hardly a statistic that inspired confidence of money well spent. This varied by region and even by city. My first refund from the mlr was 900 dollars…hardly a sign that we were at the margins at the time, and not even now. One possible scenario this last decade is obvious as time has progressed…higher profits can be had with fewer and fewer clients, but is that actually what we want. It does seem to parallel who has money.
The third point is that insurance companies have lots of ways to contribute to lowering costs, but lowering insurance costs means there are avenues of increasing profit that have little to do with medical care and much to do with the insurance company itself and how it operates. I believe at this point the incentive to increase a client base is the point…how it shakes out in terms of medical coverage is of course still to be determined.
Cynthia,
I can’t tell if you are throwing a stone or just being sarcastic…but I am glad to see you embracing good Christian values, and acknowledging the truth of Jesus’s embracing all peoples…I think there is a story about prostitutes in the New Testament to that affect. Bless you.
Scattershot, I’ll just say that you have an interesting definition of “efficiencies,” and leave it at that. Except to add this: Throwing around a lot of math computations to show profits does not constitute a definition of “efficiencies” that is specific to the issue of insurance companies’ actual service to its premium holders. Equating that with “profits” and declaring that profits incentivize better coverage–something that is flatly false–is really bizarre. Generic business and rightwing economic slogans are irrelevant in the face of actual facts to the contrary
Your math is correct. It establishes nothing at all, however, about what really is at issue here. You don’t, and aren’t capable of, understanding that, because you equate “profit” with incentive to provide more complete service. In the healthcare insurance industry, that clearly is not how it works, and adding math calculations does nothing to change that fact. Unless you acknowledge that, pre-ACA, insurance companies were incentivized by higher profits to refuse to insure people with preexisting medical conditions, to rescind coverage for people once they got sick, to have annual and lifetime caps–and to narrow their provider networks–then you’re just talking jibberish. Rightwing talking points don’t constitute facts, nor do they change the facts. Specific, relevant, direct facts. Which so many rightwingers have so much trouble with, because they just rely on slogans, generic truisms, and facts (such as math computations) that, while true, are irrelevant.
You’re not in a good position here to accuse anyone else of lacking a sense of logic, Scattergood. Really.
I’m done with this thread.
Bev,
You are yet another example of typical muddle thinking that tends to dominate the left.
There are pretty well understood terms in business based on GAAP or Generally Acceptable Accounting Practices. Terms like Gross Revenue, Gross Profit, Net Profit and the like all have well understood definitions, whether you are an insurance company or an automotive manufacturer.
And simple arithmetic shouldn’t be hard math, but it seems to be for you.
And you are just making my point, insurance companies are driven by profit. Whatever the rules you make, they will seek to maximize profits.
Pre-ACA their actions were generally in the direction of maximizing revenue and minimizing costs, with efficiency being a sought after goal because of their ability to capture the savings as profits.
Post-ACA, the ability to capture profits as a by product of increasing efficiency is gone, so their actions are more in the direction of increasing gross revenue. The insurance companies have in general decided that to do so they have to offer minimum plans that have increased coverage categories by doing so with a minimum of providers to minimize the cost to themselves and to the customer in order to capture more revenue.
You don’t like that profit motivated companies are performing actions that in their view will keep their companies profitable, at the megre 3-4% of profitiblilty that they on average they have.
The sad thing is that you can’t even dispute or begin to dispute any facts. You just hold your fingers in your ears and scream ‘right wing, right wing, wrong, wrong, wrong’. You obviously can’t really handle being challenged with facts, which is pretty typical of your lot.
Another issue that affects this is the priceing for a proceedure can vary by a factor of 3 between institutions. Some private insurance is placing a cap on the reimbursment for these proceedures. Of course outside of the insurance companies this is the desired market driven operation.
In addition now that real quality measures are being collected it is found that the old saw that the higher the price the better the medicine is not valid. Low cost institutions show similar results on quality than high cost institutions.
Then there is the fact that there is a negotiation going on between providers and insurance companies, and if the company says that it can’t get the rate it wants from an institution it will not put them in network, which will push folks towards the lower cost same quality institutions. (Actually might be better quality as there will not be as many resident around since teaching hospitals are more expensive.
Note that the presentation on reference pricing showed that it is not the physicians direct bills but the institutions bills that vary widely.
There is a way around this but will never happen, pas a law mandating that all medical care be charged at medicare rates, or at least a state wide uniform fee schedule. (ala the Japanese medical system where nationwide pricing is in force, i.e. a given procedure is reimbursed at a set rate).
Lyle,
It is even worse that you can imagine. Hospitals are restricted by anti trust laws from sharing pricing information. They cannot know what another hospital got paid for the same procedure by any insurer. However, the insurance companies know what they paid each hospital and can share that information with others.
With such opaque price discovery you can and will have a huge variance in reimbursement rates. The cost/quality ratio isn’t driven by quality but by information asymmetry or lack there of and pure negotiation ability.
I am sure some on this thread will cry ‘see the EEEVIIIIIL insurance companies are to blame’, but much of this problem could be alleviated if the hospitals had better pricing information and the government didn’t put in the information sharing restrictions. I agree it is a problem…the solution is the tricky part.
Scattergood,
Were it that simple…transparency is partially an answer only, and tough to mandate, and not shared due to business reasons. I don’t think the gov. prevents transparency meme is as useful as it appears Another way to look at pricing is that it is proprietary information, so not shared. Admittedly the process has become quite convoluted.
http://angrybearblog.strategydemo.com/2008/12/ma-experiment.html
http://angrybearblog.strategydemo.com/2008/11/health-care-in-ma-is-out-of-balance.html
http://commonhealth.wbur.org/2012/05/patrick-anti-trust-hospital-prices
@Bev:
“It’s a safe bet that today, throughout Washington state, people are flocking to the website of the one insurance company that the Seattle Times article said has plans that include access to all the main hospitals and physician groups, and that people who have not yet signed up for a policy from another insurance company will be less likely to do so. The free market in action!”
That is absolutely true in my particular case, FWT’sW. Once our wonderful free press illuminated this very opaque issue for me, my “economic incentives” became very very clear.
I had *not* looked at the Community plans, and I ran directly to them. Plugging them in to my calculator, examining the detailed provisions, and considering the great financial risk posed by all the other insurers (if I get in a bad car accident or get cancer I’m OON), the Community Bronze plan is hands-down, far and away the best deal. I sort of can’t imagine why any healthy person in Seattle would sign up for anything else.
Every plan I looked at had unlimited OON OOP exposure. Choosing the plan that actually covers the providers I might need in a bad situation hugely reduces my financial risk — which is, after all, the reason I’m buying insurance.
Dan,
Stop moving the goal posts. Nobody is saying that hospitals MUST reveal their revenues to each other.
Also, your WBUR article is pretty funny. What are ‘unwarranted price variations’?Typical central planning speak for ‘the market isn’t doing what I want it to do’, which is strange because the market is responding to the restrictive laws that the government put in place! So of course the response, ‘more laws!’
Price controls and price fixing by central planners has been and always will be a problem.
No Scattergood…it was a response to the notion you proposed that the lack of transparency or sharing of prices was prevented by anti trust regs. Goalposts are in place where you put them.