Health Insurance Exchange Narrow Networks

Western Pennsylvania HFMA
2014 Winter Education
Health Insurance Exchange Narrow Networks:
Strategies for Managing Participation
February 17, 2014
ECG Management Consultants, Inc.
For over 40 years, ECG has served as a trusted adviser
to some of the nation’s leading healthcare providers.
• ECG is a national consulting firm focused
on offering realistic, implementable
solutions to healthcare providers.
• Our staff of approximately 130
consultants operates out of offices in
Boston, Dallas, San Diego, San
Francisco, Seattle, St. Louis, and
Washington, D.C.
• We have a strong team of experts to
assist you with managed care contract
evaluation and negotiations.
ECG is committed to delivering smart and practical resolutions to critical issues,
on time and within budget, across the spectrum of healthcare organizations.
Kozyak Tropin & Throckmorton, P.A.
Kozyak Tropin & Throckmorton, P.A. (KTT )
is a boutique law firm based out of
Miami, Florida, that handles high-stakes,
complex business disputes and bankruptcy
matters throughout the country.
Our dedicated healthcare team focuses on:
Complex healthcare business litigation.
Managed care contracting and dispute counseling.
Large-scale hospital and physician reimbursement litigation.
Medicare appeals.
Over the past year, our healthcare team has counseled
its clients on disputes arising out of being improperly
excluded from the exchange plan narrow networks.
Operational Tactics
Short-Term Strategy
Long-Term Strategy
I. Introduction
I. Introduction
Market News: Initial Problems
“Almost 27,000
selected insurance
– November 13, 2013
“California shuts down sites mimicking
state insurance marketplace.”
– November 14, 2013
The error-filled start of the exchange launch
has caused the number of enrollees to be well
below the projections.
• Imitator sites have tried to take
• As of mid-November, only approximately
• The sites are operated by private brokers
advantage of the slow rollout, requiring
some states to take action.
107,000 people in total were enrolled –
about a fifth of the estimated projected
500,000 enrollees, including 27,000 on the
federal exchange.
and are prohibited by the Affordable Care
Act (ACA).
• Any plans sold outside the official
exchange before January 1, 2014, are
not eligible for federal subsidies and
would not have consumer protections
under the ACA.
• The delay has resulted in legislative
proposals to extend the deadline for
coverage from January 1 to March 31.
I. Introduction
Key Objectives
In 2013, health exchange marketplaces dominated the healthcare
headlines. 2014 will be a critical year for providers to incorporate
the newly insured into the everyday operations and plan for 2014.
• The tempestuous rollout of the health exchange marketplace Web sites in October
and November left many people frustrated and concerned about coverage for 2014.
• Some people will not obtain coverage until the end of March 2014, and others may
have the option to roll over their existing plans for another year.
• The Web site issues and late enrollment will slow the influx of new health exchange
members and allow many providers time to prepare for the newly insured members
at a more controlled pace.
• Our objective for today’s discussion is to answer the following questions about
preparing for the exchange marketplaces:
– How should providers prepare for this new type of insurance product?
– What are the day-to-day operating implications of health exchanges?
– What short- and long-term strategies should providers utilize in the next
2 years to optimize their position with this new product and new market?
I. Introduction
Increasing Enrollment and Demographics
Despite the slow start, nearly 2.2 million people selected
marketplace plans from October 1 through December 28, 2013.
• Of the almost 2.2. million:
– 54% are female, and 46% are male.
– 30% are age 34 and under.
– 24% are between the ages of 18 and 34.
– 60% selected a Silver plan, while 20% selected
a Bronze plan.
– 79% selected a plan with financial assistance.
• 65% to 89% were previously insured.
• 10% to 25% previously had employer-sponsored
Sources: U.S. Department of Health & Human Services (HHS) press release, January 13,
Forbes, January 18, 2014,
I. Introduction
Pennsylvania Exchange Plans
• No Medicaid expansion.
– Creation of “doughnut hole” of coverage at 100% to 138% of federal poverty level (FPL).
– Number of uninsured who would have been covered if Pennsylvania opted in: 435,088.
• Limited offerings.
– Three insurers: Highmark, Coventry HealthAmericaOne, and UPMC Health Plan.
– 35 to 40 plans.
– Only one Platinum plan.
• Allegheny County premiums.
– Individual (age 35): $139 to $374 per month.
– Family of four: $423 to $1,137 per month.
Source: The Morning Call, January 30, 2014,
Applications (May
Include Multiple
Individuals Eligible
to Enroll
Eligible Individuals
Who Qualify for
Assessed as Eligible
for Medicaid/
Individuals Who
Have Selected a Plan
Source: The Henry J. Kaiser Family Foundation, as of December 28, 2013,
II. Operational Tactics
II. Operational Tactics
The introduction of new health plan benefit structures and an influx of new patients
provides organizations an opportunity to examine operational processes and policies.
Organizational Health
Exchange Readiness
Finance Policies
Financial performance.
Pricing transparency.
Bad debt policy.
Plan premium support.
Utilization Changes
• Clinic scheduling.
• Ancillary service
Patient Interaction
• Exchange guidance.
• Elective out-of-network
• Provider availability.
• Emergency department
(ED) payment policy.
Grace period.
Developing and communicating a plan to the pertinent personnel
will result in an easier transition for both patient and provider.
II. Operational Tactics
Readiness Assessment
Many organizations are developing and implementing plans for
their managed care, revenue cycle, and patient financial services
departments after completing a readiness assessment.
Department Readiness Assessment Questions
• What do you anticipate will be the major impact on your department or functional
• What action will be needed to plan for the managed care changes?
• What information will you need to communicate, to whom, and by when?
• What is your preparedness plan for 2014?
Example Readiness Plan Goals
• Evaluate the financial performance of the new managed care contracts.
• Plan and implement the appropriate operational changes (e.g., capture accurate
information at the time of registration).
• Communicate with/educate the staff, physicians, patients, and community.
• Provide timely communication, as payor contract status may change.
II. Operational Tactics
Finance Policies: Financial Performance
Just as providers evaluate the financial performance of their total
managed care contracting portfolios, they should update their basic
monitoring processes to include the new health exchange products.
Monitoring the Impact of New Managed Care Contracts
• Establish new plan codes to accurately capture health exchange patients at the
time of registration/admitting.
Educate staff on the new plans.
Monitor the financial performance by health plan.
Review the co-payment and coinsurance levels for the new plan(s).
Renegotiate the contract terms if the financial performance of the product is
II. Operational Tactics
Finance Policies: Pricing Transparency and Bad Debt
A key component of the new health exchange plans is the
higher level of patient responsibility in paying for care.
Pricing Transparency
• An increase in patient financial responsibility will result in greater cost scrutiny by
• Patient demand for information will likely accelerate the movement to improve
pricing transparency.
• Pricing will only grow in importance as a key differentiator among patients
carrying a larger financial responsibility.
Bad Debt
• The increase in patient financial responsibility is expected to raise the incidence of
bad debt for insured patients.
• Review and revise, as necessary, your organization’s bad debt policies.
• Review the applicability of charity care policies with the new products.
• An organization may choose not to provide charity care to an individual who does
not buy insurance.
II. Operational Tactics
Finance Policies: Plan Premium Support
Conflicting guidance from CMS and HHS has raised a
question about the legality of premium support for patients.
“HHS discourages [premium
support] and encourages
insurers to reject such thirdparty payments.” 2
– November 4, 2013
“HHS does not consider
QHPs … to be federal
health care programs.” 1
– October 30, 2013
• HHS Secretary Ms. Kathleen Sebelius suggested in a letter to Mr. Jim McDermott, U.S. Representative, that
providers could provide premium support for patients. The logic is that health exchange marketplace-based
plans are not federal insurance programs, and therefore, the payments would not violate federal AntiKickback Statutes.
• Subsequently, the CMS Center for Consumer Information & Insurance Oversight issued conflicting guidance
and suggested that providers should not make premium payments on behalf of patients.
• A week later, the American Hospital Association restated its position that the CMS guidance does not legally
prevent the hospital subsidies.3
Source: American Hospital Association Legal Advisory, November 13, 2013.
While this situation is not likely to be resolved quickly, preparing an
organizational policy for premium support is a recommended strategy.
II. Operational Tactics
Finance Policies: Premium Payment Grace Period
The annual open enrollment period for health exchanges extends through
March 2014. Once the initial premium is paid for the health exchange
product, the member has a 90-day grace period to pay for Months 2 and 3.
Grace Period – Provider at Risk
(60 Days)
Coverage Paid by Insurance
(30 Days)
Section 156.270 – Termination of Coverage for Qualified Individuals:1
A QHP must provide a grace period of 3 consecutive months if an enrollee receiving advanced
payments of the premium tax credit has previously paid at least 1 full month’s premium during
the benefit year.
During the grace period, the QHP must do the following:
1. Pay all appropriate claims for services rendered to the enrollee during the first month of the
grace period and may pend claims for services rendered to the enrollee in the second and
third months of the grace period.
2. Notify HHS of the nonpayment.
3. Notify providers of the possibility for denied claims when the enrollee is in the second and
third months of the grace period.
45 CFR 156: Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges.
II. Operational Tactics
Finance Policies: Premium Payment Grace Period – Proactive Tactics
Providers can take proactive steps now in order to limit the risk of providing
services to patients who have not paid their premiums for Months 2 or 3.
• Work with payor for notification at the time of eligibility verification if the
patient has not paid his/her premiums.
Ask the patient if he/she has paid his/her premiums and/or request proof
of payment from the patient.
Review your admissions forms to verify that it is clear that the patient is
responsible in the event of noncoverage.
Determine if a special consent form is needed for health exchange
patients. This may vary by health plan.
Process a patient as self-pay if he/she has not paid his/her premium or if
you can not verify he/she has insurance.
Request payment in advance for elective services when insurance
eligibility can not be verified.
Consider premium payments on behalf of the patient.
II. Operational Tactics
Utilization Changes
As new patients gain coverage, there is likely to be a shift in utilization.
The magnitude of the shift will depend on the patient mix in your market.
• Utilization increases are likely to be found in primary care initially.
• Adding new patient appointments will be necessary to
accommodate the influx, depending on the uninsured population.
• What do you anticipate the volume changes will be?
• Diagnostic services will be needed to evaluate newly covered
members and the current health status of patients with preexisting
Will imaging and lab activity increase as new members seek care?
Physicians in your network may not have an open panel.
Some may need incentives to open panels and increase access.
Will your organization need to expand hours or hire additional
primary care providers, including extenders?
II. Operational Tactics
Patient Interaction: Education and Guidance
Taking the time to educate patients on insurance coverage options (Medicaid and
premium subsidies) can improve enrollment and reduce uninsured care write-offs.
• Provide initial health exchange
at ED
education to staff (e.g.,
contracted products).
• Reach out to organizations that
have received grants for health
exchange education (e.g., to
provide training and
informational materials).
• Work with the broker
community on identifying the
health plans and products that
are under contract.
II. Operational Tactics
Patient Interaction: Out-of-Network Elective Procedures
It is likely that providers will not be in-network for all the health exchange plans in
the market. How will you handle out-of-network patients seeking elective services?
Out-of-network reimbursement by the insurer for elective services will be limited.
Expect health plans to deny payment or pay providers at reduced benefit levels.
Hospital efforts in checking eligibility and benefits will be even more vital.
Patients will experience much higher out-of-pocket costs, raising bad debt risk.
Response to Noncontracted Payors
Strategy A
Strategy B
• Take a wait-and-see approach.
• Monitor denials, payments,
• Redirect all patients seeking elective
services when their health plan is
deductibles and co-payments in real
• Repatriate inpatients once stabilized.
• Determine your policy and practice
once you have more payor and
patient information.
II. Operational Tactics
Patient Interaction: Emergency Out-of-Network Claims
Reimbursement for out-of-network hospitals is likely to be an issue due to
new narrow-network products in the exchange marketplaces. This will be an
issue, particularly related to emergency visits for relatively close facilities.
Out-of-Network Reimbursement
ED reimbursement for out-of-network patients is expected to be at an
amount equal to the greater of the following:1
1. The median amount the payor pays to in-network providers for
emergency services.
2. An amount based upon the same methods generally used by payors to
pay for out-of-network services, such as usual and customary.
3. The amount Medicare would pay for services provided.
Douglas Wolfe, Esq., “Paying for Out of Network Emergency Services Under the Affordable Care Act.”
II. Operational Tactics
Patient Interaction: Emergency Visit Cost-Sharing
Cost-Sharing Requirements
• Patients are protected from higher co-payments and coinsurance for out-ofnetwork emergency visits.
• Payors can not impose higher co-payments or coinsurance for out-of-network
• Minimum payment amounts from payors are intended to protect the patients from
excessive balance billing as a result of low reimbursement to providers.
• Once the payor has paid the provider, providers can balance bill the patient the
difference between the insurance payment and billed charges.1
• If patients have met their out-of-pocket maximums, payors may be subject to
paying billed charges.
• Cost-sharing requirements will impact patients, providers, and payors.
• State law may prohibit payors from balance billing patients.
• Balance billing is a policy and public relations question that should be reviewed by
the providers.
Providers need to evaluate any state regulations that may prohibit balance billing.
III. Short-Term Strategy
III. Short-Term Strategy
Preparations: Payors and Products
Providers should first evaluate the payors and corresponding
products that are being offered in the market and determine the
significance of any contracting gaps in their managed care portfolios.
• Evaluate the Payors in the Market
– How many of your payors have a product on the exchange?
– Are these your largest payors or smaller payors?
– What payors are not in the health exchange market?
– Based upon the mix of payors, what strategic concerns do you have?
– Are there any concerns with volume shifts between payors?
• Evaluate the Products Being Offered in the Market
– How many HMO and PPO products are there?
– Is the market balanced, or are there more PPO products?
– Will more HMO products enter the market over time?
– Is there a Medicaid managed care product?
– How are the products priced in terms of total premiums and premiums after
III. Short-Term Strategy
Preparations: Hospital Competitors and Physicians
With a new product in the market, a close evaluation of your competitors’ contracting
status, along with evaluation of contracted physician networks, will be required.
• Evaluate Your Hospital Competitors
– Are your competitors contracted for the health exchange products?
– Which health plans are they contracted with?
– Will competitors gain any market share based upon their contracted health plans vs.
your contracted health plans?
– Were narrow networks established in your market?
– Are your competitors participating in narrow-network products?
– How would you describe your health exchange market position, as compared to your
• Evaluate the Physician Networks
– What physicians are contracted, by health plan and by product?
– How do the physician payor contracts align or not align with your hospital
contracting status?
– Are there certain key specialists who are not contracted for certain payor products?
III. Short-Term Strategy
Preparations: Contracted Health Plan Example
Providers can develop a simple matrix to explain their health
exchange contract status and plan for future contracting strategies.
Example Matrix
In negotiations.
Blue Cross
Multiple products.
Blue Shield
Aligned group not contracted.
Health Net, Inc.
Not participating.
Example county only.
Health Plan
III. Short-Term Strategy
Preparations: Health Plan Products and Premiums
In San Bernardino County, California, the four products being offered at the silver
level have similar premiums after subsidies. Therefore, choosing a plan is likely
to be influenced by brand recognition or contracted provider network status.
Total Premium1
Premium After
Anthem Blue Cross
Blue Shield of California
Health Net
Molina Healthcare, Inc.
Health Plans
Premiums are based upon an annual income of $40,000 and two adults age 35 and 28.
Since Health Net has the lowest premiums in the market, will
providers lose volume if they are not contracted with Health Net?
III. Short-Term Strategy
Western Pennsylvania Health Insurance Marketplace
What dynamics will impact Western Pennsylvania providers?
• Western Pennsylvania.
– Exchange plans are available from UPMC, Highmark, and Coventry.
• Highmark offers the cheapest Silver plan in the nation through its narrow Highmark
Community Blue Network plan.
– The table below illustrates the 47% higher premium for the broad network.
• It is reported that the Highmark agreement with UPMC will terminate in 2014. UPMC
providers will be out of network, and patients will face higher out-of-pocket expenses.
Broad Network
Lower Network
Premium (Single, Age 27)
UPMC will need a strategy that anticipates patients will select the
cheaper network but still want to access its facilities and professionals.
IV. Long-Term Strategy
IV. Long-Term Strategy
Payor Contracting Strategic Considerations
Year 1
• Monitor health exchange volume and financial performance by payor and by product on a
quarterly basis.
• Determine if you are losing volume due to noncontracted status.
• Analyze the contracted status of your competitors, including hospitals and physicians
(aligned and nonaligned).
• Evaluate the narrow networks in your market, specifying contracted and noncontracted
hospitals and physicians.
• Begin to plan your Year 2 strategy.
• If you have payor contracting gaps, determine the strategic and financial value of being
Year 2
• Renegotiate the contract terms if the financial performance of the product is
• Negotiate an annual rate increase.
• If you are losing volume due to noncontracted status or exclusion from a narrow network,
determine what it will take to be included in the network.
IV. Long-Term Strategy
Review of Current Contracts
There are a number of tactics that your organization can take to stay
ahead of the curve in responding to health exchanges for future years.
• Proactive Engagement – Proactively engage payors regarding exchange products.
• New Products – Understand that payors may want to include the new products in existing
– Determine if current agreements allow for add-on products (e.g., exchange products) at
– Focus on creating freestanding agreements for the exchange products so that
reimbursement for that population can be isolated.
– If an amendment is necessary, add an amendment term clause.
• Competition – Evaluate the likely response of your competitors.
• Pricing Strategy – Determine your preferred pricing strategy for these products.
90% of
Medicare Rates
100% of
Medicare Rates
135% of
Medicare Rates
5% to 10%
IV. Long-Term Strategy
Contract Questions
• What types of contracts will your organization
be offered from the payors?
– Plans are likely to continue to use existing
reimbursement structures.
• What other approaches might payors in the
exchange take?
– In many markets, payors are building
narrow networks to care for exchange
– Narrow networks may include nonexchange patients.
of Medicare
• Will your competitors be contracting for
exchange patients?
• How will you respond if the payors continue to
pay current contract rates, even if your contract
does not include a health exchange product?
IV. Long-Term Strategy
Preferred Contracting Approach
A new contract for exchange products is the preferred approach because it allows for
the greatest flexibility. Most health plans are seeking to amend existing contracts.
New Contract Considerations
• A new agreement allows for the greatest flexibility for the provider.
– Ability to negotiate rates.
– Flexibility to limit the term.
• A provider can clearly specify the exchange participants (e.g., individuals
and small groups only).
• A new contract does not interfere with your current HMO and PPO
• The base agreement requires amendments or mutual agreement for the
addition of new products.
Given the uncertainty of pricing, levels of participation, and potential
migration of commercial business to the exchange, providers need
flexibility to negotiate rates and exit the contract if necessary.
IV. Long-Term Strategy
Contract Language
• Product Definitions – Clearly specify in the contract that the rates are for
health exchange patients only.
Related Entities – Define if other owned or affiliated organizations can
access the health exchange contract rates.
Other Payors – Determine if other payors can access the rates.
Product Offering off and on the Exchange – Clarify in the contract if the
product being added is inside or outside the exchange.
Payor Filings – Ensure that your hospital is not being filed with the state
as in-network at current contract rates without being informed.
Narrow Networks – Verify that your competitors are included or excluded
from the narrow-network definition.
Existing Product to Become New Health Exchange Product – Payor
selects an existing product to be the health exchange product, then
requests a lower contracted rate. If a new contract is not agreed to, then
the current product is terminated by the payor.
Douglas Wolfe, Esq.
Mr. Charles A. Brown
Senior Manager
Kozyak Tropin & Throckmorton, P.A.
[email protected]
ECG Management Consultants, Inc.
[email protected]

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