From the January/February 2014 issue of HealthCare Business News magazine


The other downside of buying the cheaper plans is the limited access to providers. Research done by McKinsey & Co. found that the majority of the lowest-priced insurance plans sold through the marketplaces have very narrow networks of hospitals.

“These are narrow network products so a lot of physicians are not included in the network and to the extent that they’re not, it’s a problem,” says Dan Mendelson, CEO of Avalere Health, a health care consulting firm.


These narrow networks are a product of insurance companies competing on premiums. “They can’t compete, as they historically have done, through risk selection and cherry picking, they can’t exclude unhealthy people and sell only to healthy people, they can’t compete very much on benefits, they all have to cover a comprehensive benefit package,” says Timothy Jost, a professor at Washington and Lee University School of Law. “One of the few places they can compete is on premiums, which they all do, by offering a narrower network.”

Where’s my money?
These narrow networks are also affecting physicians because they can no longer negotiate a price with insurance companies, when it comes to reimbursement, they must accept what they are given. If the physician doesn’t like the amount, then they won’t be a part of their network.

“One of the ways that insurance companies are reducing their costs is to deliberately cut out expensive practitioners from their networks,” says Frank Lexa, professor of radiology at Drexel University College of Medicine. “Certainly, some of the best hospitals and doctors in the state are not going to come cheap so they may be cut.”

A Medical Group Management Association survey found that 55.5 percent of physicians in more than 1,000 group practices have an “unfavorable” or “very unfavorable” view of the impact the health exchanges have on them.

“There’s no inherent price that is the value of the physician’s services determined by markets, so I’m sure some physicians are unhappy because they’re not getting as much as they’d like,” says Jost.

But this is the only way that insurance companies can make it work to make the exchange profitable. “Basically what’s going on is we are moving toward a more competitive market, a market that looks more like markets for other products, the way markets are supposed to look where you have your supply and demand curve,” says Jost.

The reimbursement rates might be low, but Mendelson doesn’t think it’s all that bad. The law will aid physicians who treated uncompensated care in the past because most people will have insurance now. “If someone comes in and needs services and you take care of them and get nothing, that’s worse than if they come in and you get something,” says Mendelson.

January/February 2014 Magazine

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