Health Insurance Exchange Products
As we move closer to the rollout of the health insurance exchanges, health insurance carriers are beginning to prepare their product offerings to offer either within the health insurance exchange or as a competitive product to the health insurance exchange products. The following article from the Wall Street Journal discussed how health insurers are developing lower premium products that feature a narrower network of providers: http://online.wsj.com/article/SB10001424127887323699704578328693720458354.html
While the article focuses primarily on hospitals; the insurers’ push to develop these products will affect all healthcare providers. As noted in the article, when beneficiaries are comparing and selecting a health plan, “The tests have found that premiums are the most important factor in consumers’ choices, he said, with more than half typically opting for a narrow-network product if it cost them at least 10% less than an equivalent with broader choice.” Therefore, insurers are incentivized to develop these lower-premium, narrow networks to appeal to consumers purchasing healthcare coverage through the exchange.
To achieve the necessary savings to offer reduced premium products, insurers are pushing for rate reductions from healthcare providers. As stated in the article above, “WellPoint Inc. has said it is aiming to pay providers somewhere between Medicaid and Medicare rates, and sees talks trending toward rates close to Medicare.. An Aetna Inc. official at an investor conference Monday suggested the rates might settle somewhere between Medicare and commercial.”
The insurers are positing that although the rates will be lower for providers, there will be more patients driven into their practice through these health insurance exchange products. This is unlikely to true; for example, in Georgia, it has been estimated that 2/3 of the beneficiaries purchasing insurance coverage through the exchange will be moving from a commercial insurance product to a health exchange product. Based on this estimate, there is a significant possibility that by participating in a reduced-rate, narrow provider network for the health exchange, you may reprice your current commercially insured patients to rates somewhere between Medicare/Medicaid.
Additionally, while insurers are pushing for significant rate reductions from physicians, it is unlikely that there will be any correlation between the amount that your rates are reduced and the actual premium reductions that insurers will offer on their exchange products. As noted above, as little as a 10% difference in premium will make a difference to a consumer and insurers are discussing rate reductions of much greater than 10% for providers.
When looking at the insurers’ strategy in developing health insurance premiums, it is also important to remember that under healthcare reform, they are required to meet specific medical loss ratios, which sets specific guidelines about how premium dollars can be spent. Depending on the size of the health plan, between 80% and 85% percent of all premium dollars must be spent directly on healthcare services; however, between 80% and 85% of $2 million premium dollars is significantly more than 80%-85% of $1 million premium dollars. Health insurers are effectively incentivized to maintain higher premium rates.
SHP will continue to monitor these market developments but strongly believes that you need to be cautious in looking at any new healthcare product that will be offered on the exchange. Insurers are going to tell you about all the patients that you are going to lose by not accepting their terms for their exchange products but their efforts to drastically reduce your rates while minimally lowering their premiums has the potential to be one of the biggest gimmicks in the healthcare market and can significantly affect your practice.