Insurers in California's new health insurance exchange are holding down premiums by limiting choices, raising concerns that patients will struggle to get care.

By Chad Terhune, Los Angeles Times
September 14, 2013, 6:34 p.m.

The doctor can't see you now.

Consumers may hear that a lot more often after getting health insurance under President Obama's Affordable Care Act.

To hold down premiums, major insurers in California have sharply limited the number of doctors and hospitals available to patients in the state's new health insurance market opening Oct. 1.

New data reveal the extent of those cuts in California, a crucial test bed for the federal healthcare law.

These diminished medical networks are fueling growing concerns that many patients will still struggle to get care despite the nation's biggest healthcare expansion in half a century.

Consumers could see long wait times, a scarcity of specialists and loss of a longtime doctor.

“These narrow networks won't work because they cut off access for patients,” said Dr. Richard Baker, executive director of the Urban Health Institute at Charles Drew University of Medicine and Science in Los Angeles. “We don't want this to become a roadblock.”

To see the challenges awaiting some consumers, consider Woodland Hills-based insurer Health Net Inc.

Across Southern California the company has the lowest rates, with monthly premiums as much as $100 cheaper than the closest competitor in some cases. That will make it a popular choice among some of the 1.4 million Californians expected to purchase coverage in the state exchange next year.

But Health Net also has the fewest doctors, less than half what some other companies are offering in Southern California, according to a Times analysis of insurance data.

In Los Angeles County, for instance, Health Net customers in the state exchange would be limited to 2,316 primary-care doctors and specialists. That's less than a third of the doctors Health Net offers to workers on employer plans. In San Diego, there are only 204 primary-care doctors to serve Health Net patients.

Other major insurers have pared their list of medical providers too, but not to Health Net's degree. Statewide, Blue Shield of California says exchange customers will be restricted to about 50% of its regular physician network.

In response, California officials have been pressing Health Net and other insurers to add more doctors since companies filed their initial rosters in May. The state exchange, Covered California, says it will monitor enrollment closely once it begins next month and it's prepared to step in if problems arise.

“Our interest is in assuring everyone enrolled in a plan has ready access to the clinicians they need,” said Peter Lee, executive director of Covered California. “That means if a plan can't serve patients, we'll close it down from taking new enrollment. That is in some ways the nuclear option.”

Rather than mere head count, officials say they are scrutinizing what capacity physicians have to accept new patients. And to assist consumers, California will enable people to search for specific doctors online during enrollment to determine what, if any, health plans they will be part of in Covered California.

“Does the doctor have room for one more patient or 40 patients? It's about available seats,” Lee said. “We want to make sure every network has enough doctors.”

Health Net says price will probably matter most to the uninsured and people who buy their own health insurance now, so it built a narrow network to serve those “value seekers.”

“We have more than enough doctors for our projected enrollment through 2014, and we have time to adjust if it becomes necessary,” Health Net spokesman Brad Kieffer said. “We continue reaching out to providers, and we are bringing more on board.”

In recent months, the top priority for state officials and insurers has been affordable premiums. A smaller panel of doctors and hospitals generally yields lower rates because insurers can negotiate better discounts with providers who receive more patients.

Insurers and some consumer advocates think people are willing to trade some choice in order to pay less. More employers have been adopting these narrower networks in recent years to trim their own healthcare bills.

The California Medical Assn., which represents more than 37,000 doctors statewide, thinks the state is underestimating the difficulties ahead.

Based on its research, the organization is skeptical of the state's claim that its health plans will cover about 80% of all California physicians. Other doctors worry about the effect on certain Latino and African American communities that have been historically underserved.

Covered California says it's still compiling a list of all providers for the 12 health insurers in the exchange.

Supporters of the healthcare law say these types of problems are inevitable in rolling out such a massive program. Overall, they say, millions of consumers stand to benefit from guaranteed coverage regardless of preexisting medical conditions and the protection from financially crippling medical bills.

But some health policy experts say that medical costs will continue to escalate if patients can't see their doctor regularly and get the follow-up care they need for chronic conditions such as diabetes. Similar concerns over patient access have surfaced in other states such as Maine and Wisconsin.

“We are nervous about these narrow networks,” said Donald Crane, chief executive of the California Assn. of Physician Groups. “It was all about price. But at what cost in terms of quality and access? Is this contrary to the purpose of the Affordable Care Act?”

The federal law requires exchange plans to include enough providers so

that services are available “without unreasonable delay.” Likewise, state law sets various requirements for “network adequacy” so patients have enough doctors and hospitals nearby.

The differences in network size are noticeable across Southern California. Health Net has 920 physicians in Orange County, compared with more than 2,500 for Blue Shield, according to company data. Health Net has fewer than 800 doctors in San Diego County, while nearly 3,000 physicians are available in an Anthem Blue Cross plan.

In addition to doctors, some big-name hospitals may be left out. A spokesman for Cedars-Sinai Medical Center said the hospital has received many calls from patients who were worried about keeping their access to the hospital and its affiliated doctors in the new health plans next year.

Cedars-Sinai is available only on two lower-priced Health Net plans in the state-run market, according to the hospital and insurer. Anthem Blue Cross says that it's the only insurer that includes UCLA Medical Center and other UC facilities statewide.

In some ways, insurers are mimicking HMO giant Kaiser Permanente, which has limited patients to its own hospitals and doctors for decades. Kaiser is offering its full slate of in-house providers in the exchange, totaling more than 5,700 doctors in the Los Angeles area.

Newly released data show the pricing power of these tighter networks. In Los Angeles County, Health Net is consistently the lowest-cost option for a mid-level Silver plan across various age groups.

A family of four in Norwalk earning $65,000 annually would pay $384 a month for a Health Net policy, after taking into account a federal subsidy based on their income. For a policy with identical benefits, Blue Shield was next at $477 a month and Kaiser was the most expensive at $602.

The cheapest Silver plan for a couple in their mid-50s earning nearly $100,000 a year was also Health Net at $781 a month. An Anthem policy costs $897.

Consumers can check prices at http://www.coveredca.com.

“Health Net will get a lot of business with those rates,” said Glen Futterman, a health insurance broker in Woodland Hills. “But no one mentions you might not be able to see your doctor.”

Companies sweating Obamacare tax—and acting on it: Study

CNBC.com | Wednesday, 21 Aug 2013 | 11:53 AM ET

Mid- and large-sized companies overwhelmingly expect health-care costs to increase under Obamacare—and most are eyeing possible changes to their health insurance offerings because of a looming excise tax for pricier plans under the health-care reform law, a new survey of employers finds.

In fact, 40 percent of 420 companies surveyed by Towers Watson said they will be changing their insurance plans' designs in 2014 in light of the coming excise tax as well as to control employee-related health costs.

And nearly 60 percent of the companies view private health insurance exchanges as a possible way to control their health-care and administrative costs by shifting the work of insuring their workers off

to those exchanges in the future.

But most of those companies—which collectively employ 8.7 million people—don't have firm near-term plans to do so.

The study also found those same companies are increasingly unlikely to offer their employer-sponsored plan for retirees older than age 65 as Obamacare state insurance exchanges go into effect, and as Medicare remains available to those people.

The number of employers either very or somewhat likely to discontinue such plans for those retirees grows from 25 percent in 2014 to 44 percent in 2015, according to Towers Watson, the global professional services company, which released its study Wednesday.

But the same study found a very strong majority of those companies—82 percent—see their ability to offer subsidized health benefits to existing workers as an “important” as part of their “employee value proposition” for 2014, according to the study.

And 98 percent of the employers have no definite plans to discontinue health-care coverage in 2014 and 2015 and direct their full-time workers to the state health insurance exchanges.

“Most companies very much still see health-care benefits as a core offering,” said Ron Fontanetta, a senior health-care consultant at Towers Watson.

“It's a very visible benefit, and it garners a lot of attention among executives, in part because it's very visible to employees and also because it costs a lot,” Fontanetta said.

Companies taking action

However, the Towers Watson study is being released on the same day that it was revealed that delivery giant United Parcel Service told white-collar employees two months ago that UPS was excluding 15,000 working spouses from the Atlanta-based company's health plan next year because of increased medical casts, and “costs associated with the Affordable Care Act,” according to a memo cited by the Kaiser Health News service.

UPS' decision, according to Kaiser Health, is based on the ability of the affected employees' spouses to obtain insurance coverage elsewhere.

A UPS spokesman told Kaiser Health that the company expects to save about $60 million per year with that decision.

The Towers Watson study, in a reflection of the high costs that UPS and other companies are identifying and reacting to, found that the chief financial officers of the companies surveyed are increasingly involved in decision-making for those businesses' health-care strategies.

When the survey asked companies to what extent their CFOs are more involved in such decisions than they were three to five years ago, 46 percent of the companies said it was to either a great or significant extent.

Fontanetta said those CFOs aren't necessarily sitting down with benefits managers and designing health-care offerings. But, he said, “They are increasingly asking questions about 'where are we taking our future strategy? how does the challenge of offering health care reconcile with our broader financial goals as an organization?'”

“They want to understand, increasingly, what are the different strategic pathways [the companies] might take,” Fontanetta said.

Looming excise tax

At the forefront of many of those CFOs' minds, and the minds of other executives at the surveyed companies, is the looming threat of an excise tax on benefits under a provision of the Affordable Care Act that goes into effect in 2018.

That tax on the companies will initially be on health-care coverage whose aggregate cost for workers exceed $10,200 for self-only coverage and $27,500 for other coverage.

The tax is 40 percent of the amount that the worker pays in excess of those limits. Despite the fact that the tax doesn't kick in for more than four more years, it is already affecting having an effect on decision-making.

A total of 60 percent of employers said that the excise tax will have either significant or moderate influence on their health-care benefits strategy in 2014 and 2015, the study found.

“This is a big deal,” Fontanetta said of those results. “It's one of the most important findings.”

He noted that more than 60 percent of the companies expect to be subject to the excise tax, absent any changes in their health-care offerings that would avoid it.

“But we don't think companies are going to sit tight,” Fontanetta said.

—By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan.

Yet Another White House Obamacare Delay: Out-Of-Pocket Caps Waived Until 2015

Avik Roy, Contributor, FOrbes Magazine August 13, 2013

First, there was the delay of Obamacare’s Medicare cuts until after the election. Then there was the delay of the law’s employer mandate. Then there was the announcement, buried in the Federal Register, that the administration would delay enforcement of a number of key eligibility requirements

for the law’s health insurance subsidies, relying on the “honor system” instead. Now comes word that another costly provision of the health law—its caps on out-of-pocket insurance costs—will be delayed for one more year.

According to the Congressional Research Service, as of November 2011, the Obama administration had missed as many as one-third of the

deadlines, specified by law, under the Affordable Care Act. Here are the details on the latest one.

Obamacare contains a blizzard of mandates and regulations that will make health insurance more costly. One of the most significant is its caps on out-of-pocket insurance costs, such as co-pays and

deductibles. Section 2707(b) of the Public Health Service Act, as added by Obamacare, requires that “a group health plan

and a health insurance issuer offering group or individual health insurance coverage may not establish lifetime limits on the dollar value of benefits for the any participant or beneficiary.” Annual limits on cost-sharing are specified by Section 1302(c) of the Affordable Care Act; in addition, starting in 2014, deductibles are limited to $2,000 per year for individual plans, and $4,000 per year for family plans.

There’s no such thing as a free lunch. If you ban lifetime limits, and mandate lower deductibles, and cap out-of-pocket costs, premiums have to go up to reflect these changes. And unlike a lot of the “rate shock” problems we’ve been discussing, these limits apply not only to individually-purchased health insurance, but also to employer-sponsored coverage. (Self-insured employers are exempted.)

These mandates have already had drastic effects on a number of colleges and universities, which offer inexpensive, defined-cap plans to their healthy, youthful students. Premiums at Lenoir-Rhyne University in Hickory, N.C., for example, rose from $245 per student in 2011-2012 to between $2,507 in 2012-2013. The University of Puget Sound paid $165 per student in 2011-2012; their rates rose to between $1,500 and $2,000 for 2012-2013. Other schools have been forced to drop coverage because they could no longer afford it.

According to the law, the limits on out-of-pocket costs for 2014 were $6,350 for individual policies and $12,700 for family ones. But in February, the Department of Labor published a little-noticed rule delaying the cap until 2015. The delay was described yesterday by Robert Pear in the New York Times

Los Angeles Times by Chad Terhune –

July 19, 2013:

Health insurance giant Anthem Blue Cross is spurning California’s new insurance market for small businesses, a potential setback in the state’s rollout of the federal healthcare law.

Anthem, a unit of WellPoint Inc., is California’s largest insurer for small

employers. The company’s surprising move raised concerns about the state’s ability to offer competitive rates and attract businesses to its new Covered California exchange that opens Jan. 1.

The federal Affordable Care Act left it up to health insurers to decide whether they wanted to sell in these government-run marketplaces.

Friday’s disclosure made Anthem the first big insurer in California to publicly pass on the small-business pool. Some other big names, such as UnitedHealth Group Inc. and Aetna Inc., have already opted out of California’s larger exchange for individual consumers.

Overall, most industry experts have not expressed alarm about the handful of big companies so far that have chosen to sit on the sidelines. They say insurer participation has been fairly solid across the country thus far and next year’s premiums have come in lower than expected in California and other states.

The level of insurer competition “has been a pleasant surprise in a number of

states and in other places it’s been more mixed,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.

Anthem’s decision in California underscored that the small-business exchanges are the most susceptible to a lack of interest among insurers.

The state’s largest for-profit health insurer isn’t abandoning the small employer market, which is limited to firms with 50 or fewer workers. It said it would keep selling coverage to small companies outside the exchange, and it also remains one of 13 health insurers that will offer policies to individuals in Covered California.

Anthem led California with 31% of the small-employer market in 2011, according to the most recent Citigroup data. Kaiser Permanente was a close second with a 28% share, followed by Blue Shield of California with 18% of small firms. Both Kaiser and Blue Shield are expected to participate in the small-group exchange.

Nonetheless, Anthem’s move caught many observers off guard.

“That’s really surprising and not a good thing for the exchange,” said Micah Weinberg, a senior policy advisor at the Bay Area Council, an employer-backed San Francisco group. “Anthem is a very major player in the small-group market and you want a broad range of insurers, particularly the most compelling brand names.”

Covered California sought to downplay any potential fallout on rates and employer choice, likening Anthem’s departure to one airline pulling out of a highly competitive market.

“We don’t think it will have a huge impact,” said exchange spokesman Dana Howard. “There are other companies that are just as big. This will be a competitive market.”

Employers will learn more early next month when Covered California announces the health insurers and their proposed rates for the small-business exchange. In the first few years, the state estimates up to 200,000 small-business workers and family members may get coverage through the state’s market.

In the exchange, some small firms are able to use federal tax credits to help purchase insurance for their workers.

The state had required health insurers wanting to sell in the individual exchange to also submit a bid for what’s known as the SHOP, or small-business health options program. But Howard said the state lifted that requirement last month to give health plans more flexibility.

Anthem said it took advantage of that option once it was available.

“Because Anthem is no longer required to participate in SHOP as a condition of being on the individual exchange,” said company spokesman Darrel Ng, “Anthem has withdrawn its SHOP application. Anthem will continue to participate in the individual exchange.”

Anthem also said it will remain part of a private exchange for small firms called California Choice.

One concern for health insurers selling in exchanges is that too many customers with big medical bills pick a certain company and it absorbs a higher share of the medical costs among that population.

“The reality is that risk is not spread equally in an exchange,” said Bruce Jugan, an insurance agent in Montebello and president of Benefitscafe.com, which sells health insurance to individuals and businesses.

“If SHOP can offer comparable plans with lower rates then they will get a lot of business, even without Anthem Blue Cross participating,” Jugan added.

Anthem has come under fire from regulators

recently over rate hikes for small businesses.

Last month, California Insurance Commissioner Dave Jones asked the exchange to bar Anthem from its small-group market because of what he viewed as unreasonable premium increases.

“I think Anthem withdrew because they felt they would be excluded or at a minimum they didn’t want to face additional debate” over their rate hikes, Jones said Friday.

Covered California had said it would consider the commissioner’s request alongside other factors. Anthem said the recommendation by Jones had no bearing on its decision to drop out.

After passing on the state’s individual exchange, both UnitedHealth and Aetna went a step further by deciding to exit the individual market entirely at year end. That will force nearly 60,000 customers in California to find new coverage.

The Press Democrat by Guy Kovner –

July 19, 2013:

The average California family will be forced to spend a third of its annual income for health insurance by 2022 if costs continue to spiral upward at current rates, according to recent reports by industry groups.

Obesity, prescription drugs, unnecessary tests and expensive new technology are driving up health care costs in California, according to a report issued

this month by the California Association of Health Plans.

Obesity alone adds $12.8 billion to the state's $230 billion annual health care bill. More than 60 percent of Californians are overweight or obese, and obesity is expected to double by 2030, increasing its share of health care costs by 15.7 percent.

The state's total health care bill has tripled since 1991, with cost increases exceeding inflation and expected to keep growing due to multiple factors, including the rollout of the federal Affordable Care Act in 2014 and the increasingly overweight public. (The state's population has nearly doubled since 1991.)

Area doctors say much of the spiraling cost is due to the way health care services are paid for, echoing a study earlier this year by the Berkeley Forum for Improving California's Healthcare Delivery System.

That report, by a

blue-ribbon group that included Blue Shield of California, Kaiser Permanente and Sutter Health in collaboration with the UC Berkeley School of Public Health, called for sweeping change in the economic model for California health care.

The current model, known as fee-for-service, is not the right medicine for Californians, who are already spending $23 a day on health, said Dr. Stephen Steady, a gastroenterologist who is president of the Sonoma County Medical Association.

Fee-for-service bases patient payments on the number of tests and treatments performed rather than overall efficiency

or the medical outcome. That encourages a “duplication of services that may not be needed,” Steady said.

When each independent health care provider is ordering the tests and imaging needed to treat patients — and billing for his or her services — the costs “just start adding up,” Steady said.

And that fragmented care, he said, underlies the California Association of Health Plans report, which said that as much as 30 percent of nation's health expenditures — $810 billion in 2011 — goes to unnecessary tests, treatments, drugs and hospitalizations.

“The incentives are not aligned in an effort to control costs,” Steady said.

By dramatically cutting back on the fee-for-service model, California could trim $110 billion from health care from the estimated $4.4 trillion expenditures between now and

2022, according to the Berkeley Forum report.

That would cut costs an average of $802 per household per year over that period, and $1,422 per household in 2022, the report said.

“It is time for fundamental change. It is time for action,” the report said, calling its plan “a transformational, bottoms-up approach to creating a more affordable, cost-effective healthcare system.”

Instead of fee-for-service, which accounts for 78 percent of the state's health care expenses today, the report calls for more integrated systems, similar to Kaiser's, that draw primary care physicians, specialists, hospitals and even nursing homes into a collaborative effort to provide patient care.

The provider groups would operate under a “risk-adjusted global budget” for each patient, a wonkish term for setting a target cost based on a person's diagnosis.

This bundled care system provides penalties for exceeding the cost targets and rewards for staying within them, Steady said.

“We are learning that we need to work together for the patient to benefit the most,” said Patrick Johnston, president of the health plans association, which represents 39 plans including Aetna, Anthem Blue Cross, Blue Shield, Health Net and Kaiser.

The Berkeley Forum report proposed reducing the share of fee-for-service expenditures from 78 percent of the state's health care spending to just 50 percent by 2022. It would do this by boosting the number of Californians now enrolled in integrated systems, 29 percent, to 60 percent.

Dr. Brad Stuart, director of Sutter Health's home care program in Santa Rosa, said this is one of many calls for increasing integrated care, which he supports.

“Providers are compelled to be more responsible and accountable for what they do,” he said. “They only lose money if they run up the costs.”

Sutter Health, which operates 24 hospitals in Northern California and is building a new $284 million hospital in Santa Rosa, is taking a step toward integration with the launch of a health insurance plan called Sutter Health Plus.

The new plan is expected to be available for enrollment in Sonoma County in the fall of 2014.

Kaiser Permanente, founded in 1945, pioneered the concept of combining health insurance, physicians, and hospitals into a single organization. It remains the nation's only fully integrated system.

Dr. Walt Mills, a Kaiser family practice doctor, described how it worked recently on behalf of a cancer patient.

Mills was studying the patient's magnetic resonance image and, in order to consult with an oncologist, walked 30 yards down the hall at Kaiser's Santa Rosa Medical Center.

The two got on a conference call with a Kaiser neurosurgeon in Redwood City and in five minutes determined a care plan that would have taken days or weeks to develop outside an integrated system, he said.

Mills, who was in a private practice with about 50 percent fee-for-service compensation for 17 years before joining Kaiser, felt compelled to join a system that he said saves money and improves the quality of patient care.

Kaiser is 10 percent more cost-efficient than the average health maintenance organization and 15 percent ahead of all plans in the markets Kaiser serves, according to a report in April by Aon Hewitt, a consulting firm commissioned by Kaiser.

Kaiser serves more than 7 million members with 36 hospitals and 12,000 physicians in California. Sonoma County membership totals nearly 188,000.

Fee-for-service is “the elephant in the living room” of health care cost inflation, said Dr. James DeVore, medical director of the Annadel Medical Group of physicians affiliated with Santa Rosa Memorial Hospital.

Costs “will drop considerably,” he said in an e-mail, as health care moves “away from a hospital-based focus of managing illness” to an integrated model that stresses prevention, wellness and “aggressive management” of chronic illnesses like diabetes.

The United States gets a poor bang for its health care buck, said Dr. Mary Maddux-Gonzalez, chief medical officer of the Redwood Community Health Coalition, a network of clinics and health centers.

Health spending per capita in the U.S. was $8,233 in 2010, 56 percent more than Switzerland, the next highest nation, and more than twice as much as the average in seven other developed countries in Europe, according to a California Healthcare Foundation report.

But Americans' life expectancy, 78.7 years in 2010, was 25th in the world in 2011, while deaths due to medical errors, estimated at about 200,000 per year, rank among the

nation's top five

causes of death.

“We are not getting value commensurate with what we're spending,” said Maddux-Gonzalez, the former county public health officer, who also faulted the fee-for-service system.

“The financial incentives are not lined up for good outcomes,” she said.