Health plans are tiering up
a new law is prodding health insurers to design plans that would force their customers to pay more out of pocket if they go to a more expensive hospital or specialist for care.
The law, passed last summer, requires all of the state’s health insurers to offer at least one plan that rates providers on cost from low to high and charges customers based on which provider they use. Cheaper providers would cost patients less out of their own pocket, while higher-price doctors and hospitals would mean paying hundreds, maybe thousands, of dollars more each year.
“This idea of shared responsibility, this does bring consumers into that equation,” says Barbara Anthony, deputy commissioner of the Executive Office of Consumer Affairs, whose Division of Insurance oversees health plan regulations. “This is a perfect triangle of interested parties—consumers, health plans and providers—and gives consumers a great stake in the reduction of health care cost.”
But containing those costs is no easy matter. While the Legislature ordered health plans to have their new plans ready this year and mandated savings of 12 percent, lawmakers did little in the way of defining how those plans should look and how the rating system should be devised.
Even before the mandate takes effect, Blue Cross Blue Shield of Massachusetts will offer several plans—some with tiered networks, some with limited networks where more expensive providers are not an option. Blue Cross officials say their new plans will help reduce costs. They say the new plans will cost about 4 percent more, but far less than the 10 to 12 percent increases coming at comparable plans without tiered networks.
“By doing this, we’re able to show people the difference in the cost among facilities at the same time we’re able to keep the monthly premiums lower,” says Tara Murray, a spokeswoman for Blue Cross. “Historically, the consumer has been veiled from the changes in the cost so this offers a little more transparency.”
The new law only requires insurers to offer one plan in each of the regions they serve around the state, meaning if someone lives in a geographic area that is served primarily by high-cost providers, their out-of-pocket expense may include more gas for the car ride to a lower-cost provider in another region.
There also are few guidelines in the law to determine how to rate providers for tiering, leaving that up to each health plan. Some plans say the tiers are designed to account for “quality and/or cost,” but the terminology used to describe them seems more suited to cost. For example, several plans that offer tiered networks describe low-cost hospitals as “excellent,” while higher cost facilities are labeled “standard” or “basic.” Children’s Hospital and Massachusetts General Hospital in Boston are lumped in the basic tier. Both facilities are high cost, but few would challenge the quality of their care.
One employer who has been successful in implementing a tiered network is the state of Massachusetts. The 12 health plans offered by the state’s Group Insurance Commission to 300,000 active and retired employees have used tiered networks for four years now with increasing success and cost-savings. About 20 percent of physisicans are rated in the least expensive tier 1 category, 65 percent in tier 2, and 15 percent in the highest-cost tier 3.