Catholic Health, its affiliated doctors and Independent Health announced Wednesday that they will offer a new health insurance option next year that lowers premiums in exchange for a more limited number of hospitals.
“Narrow” or “tiered” network health plans represent a trend sweeping the country as employers demand relief from skyrocketing health insurance costs.
They indicate a future in which many insured patients will face restrictions in choice of medical providers, and a blurring of the lines between hospitals and insurers.
They also reflect preparations for the start of major aspects of health reform in 2014 when states must develop new insurance marketplaces called “exchanges” where individuals and businesses can shop for coverage.
The Affordable Care Act, at its heart, is a market-based approach to reform, and hospitals, doctors and insurers are getting ready to serve millions more Americans who will have insurance under the law.
One of the new health plans will be known as First Choice and will be sold starting Jan. 1 to large employers – those with 200 or more employees – that self-insure, meaning the businesses manage their own health insurance.
First Choice will include all participating physicians in the Independent Health network. But these health plans incorporate “tiers,” in which patients pay no or small co-payments if they use Catholic Health hospitals. Patients incur more expensive deductibles and co-insurance for using other medical providers.
Co-insurance is the percentage of medical expenses a patient is responsible for in addition to a deductible, which the patient needs to pay before the insurance company pays its share of expenses.
Catholic Health and its 900 affiliated physicians, Catholic Medical Partners, introduced First Choice to the hospital system’s more than 8,000 employees in 2009 and then on a limited basis in 2010 to some of its Catholic partners, including the Diocese of Buffalo and Baker Victory Services. The savings on premiums have ranged from 8 percent to 25 percent and averaged 18 percent, officials said.
The other plan, yet to be named or approved by the state Insurance Department, will be marketed in mid-2013 to small-group employers who buy community-rated health insurance.
“We have a highly efficient hospital system and can show a demonstrated value in the care we provide,” said Joseph McDonald, president and chief executive officer.
Catholic Health includes four hospitals – Mercy; Kenmore Mercy; Sisters of Charity; and Sisters of Charity, St. Joseph Campus – as well as nursing homes and primary care centers.
McDonald and others said the new health plans reflect growing interest in trying new approaches to deliver health care that can better control costs without sacrificing quality.
BlueCross BlueShield of Western New York, which initially administered First Choice for Catholic Health, in April announced a similar initiative with Kaleida Health and another physicians group for employers that self-fund their insurance.
“The emphasis today is on creating value and shifting more decision-making to people in the health plans,” said Dr. Michael Cropp, president and chief executive officer of Independent Health.
“The concept in health care of full availability of all doctors, especially when everyone is not of equal value, is going to be a thing of the past,” he said.
Narrow networks resemble the controversial restrictions HMOs tried in the 1990s that consumers and doctors rejected. But officials say there are major differences today, including a more cooperative, rather than adversarial, relationship among the insurer, hospital system and doctors.
“Physicians are in the forefront of the system redesign,” said Cropp. “We’re moving into a more trusting relationship where we can complement each other.”
One key reason for the difference is greater acceptance by employers and employees, because of the mounting financial burden of health insurance costs.
Other factors include better data technology for improving quality and tracking patients; a focus on care coordination, disease management and wellness; performance measurement; and risk-sharing payment arrangements among the organizations, according to officials.
“Part of the effort here is to bend the cost curve aggressively. We have to focus more attention on disease management, because the majority of the costs in health care arise in the disease state,” said McDonald.
Despite their growing popularity, such integrated networks with their tiered benefit plans prompt questions, such as just how much they can manage costs and move away from paying for the amount of care provided, rather than for the quality of the care.
Regardless, their resurgence could reshape the commercial insurance market for tens of millions of Americans, said William Eggbear, managing director of BDC Advisors, a Miami, Fla.-based health care consulting company.
“The restrictive networks of the 1990s were really focused on cost. Now, with physicians aligned in these new plans, it’s more about being efficient while providing quality care,” Eggbear said.
In a report issued earlier this year, BDC Advisors concluded that the commercial market in the U.S. will likely transition to a market in which most consumers receive insurance and care from tightly managed, competing narrow networks, unless they can afford something better.
“To be competitive, employers will have to control their benefit costs,” he said.