How Insurance Exchanges Will Affect Doctors' Income

Leigh Page

Disclosures

July 10, 2013

In This Article

Potential Reimbursement Cuts

Very few exchange plans have released reimbursement rates for physicians, but Katz says Connecticut physicians got an early taste in March, and it was a shocker. Two commercial insurers planning to be in the state exchange sent some doctors letters proposing reimbursements that were 30%-40% below what they get in the insurers' existing nonexchange plans.

"The amount of these cuts is unprecedented in Connecticut in recent years, and it comes after many years of no increases from many of the commercial insurers," Katz says.

It is not surprising that exchange insurers are interested in reimbursement cuts, because they are under great pressure to reduce costs, says Cindy Gillespie, Senior Managing Director and leader of the insurance exchange team at McKenna Long & Aldrich, a law firm in Washington, DC. "Because this will be a low-income working population, the plans will behave more like Medicaid plans and try to cut rates," she says. In coming years, as exchange insurers eye each other's premiums, they will "compete with each other to offer lower rates," she says. "Plans will emphasize efficiency as well as cut reimbursements."

A key way to do this is to create "narrow networks," which many insurers have already been setting up outside of exchanges. These networks involve only a fraction of providers in the insurer's full network. John Weis, president of Quest Analytics in Appleton, Wisconsin, who has been helping plans identify providers for narrow networks, says this approach is being used by many exchange plans. "Insurers want to play in the healthcare exchanges but they want to minimize their financial risk by not having their entire network in play," he says.

Weis says that the initial federal rule for network adequacy of exchange plans is fairly loose, allowing plans to keep out most providers. The rule states that plans must "maintain a network that is sufficient in the number and types of providers...to assure that all services will be accessible without unreasonable delay."[3] He notes that California exchange networks, for example, have excluded some prestigious teaching hospitals. When a hospital is not in a narrow network, physicians on staff will also be excluded from it, he says.

When plans form narrow networks, Weis says they first negotiate rates with hospitals and only later start determining which physicians will be included. Reimbursement cuts are not necessarily needed, because plans can cut costs by choosing the least costly physicians, in a controversial process called "cost profiling." A study on cost profiling by Massachusetts plans found that physicians were improperly categorized two thirds of the time.[4] The American Medical Association offers advice for doctors on how to protest plans' choices of doctors based on cost profiling.[5]

By this fall, Weis says, exchange plans will be sending invitations to doctors to join both narrow-network and full-network exchange plans. They will be asked to sign a rider, an amendment to their contracts, that details reimbursement rates and other stipulations for the new plan.

Opting Out Isn't So Easy

However, doctors are probably more concerned about being forced into exchange plans rather than kept out of them, says Owen Dahl, owner of Owen Dahl Consulting, a practice management consultant in Houston, Texas. "In most cases, physician practices have got a lot of volume, so they don't need more patients," he says. "This is especially true for primary care physicians."

When Massachusetts initiated an exchange and insurance mandate as part of its health insurance reform of 2006, primary care physicians were deluged with patients. Six years later, nearly one half of primary care practices in the state were still closed to new patients, according to a 2012 physician survey by the Massachusetts Medical Society.[6]

Beginning this summer, "navigators" -- nonprofit organizations paid by each exchange -- will send out workers to locate uninsured persons, educate them about the exchanges, and convince them to sign up.[7] The Congressional Budget Office (CBO) expects 7 million enrollees in the first year, rising to 24 million by 2023, as detection and enrollment systems improve and the penalties for not buying insurance are raised.[8]

Enrollees will go onto the exchange Website to choose a plan, then go on to the plan's Website to choose a doctor. Katz says it's too early to tell how enrollees would be matched with doctors. In a narrow network or a network where only a few doctors choose to join, a doctor might be deluged with patients, but right now, "doctors have absolutely no idea whether they are going to see a flood or a trickle into their practices," he says.

Physicians who don't want more patients could decide not to join exchange networks, but it may be difficult to opt out. Many insurers have "all-products" clauses in their contracts with physicians, requiring them to accept any enrollee from any of the plan's various products.[9] Katz says that such states as Connecticut have laws barring all-products clauses, but some Connecticut insurers are suggesting that the ban does not apply to exchange plans. "They seem to be saying that this not a new product, but a reconstitution of an existing product," he says.

William D. Patten, Division Vice President of Professional Network at Blue Cross Blue Shield of Illinois, the largest health insurer in the state and a player in the Illinois exchange, says his company has an all-products clause. All physicians signed up with the Illinois Blues will automatically be included in its full and narrow networks offered on the exchange. Citing the clause, he says the company will not be sending physicians letters about the exchange network. Instead, he says, they can determine network status by consulting the list of providers that will be posted on the company's Website.

Physicians in the Illinois Blues network will be able to opt out, but "we do not anticipate any of the physicians doing that," Patten says. That's because the contract stipulates that if physicians will no longer see a particular type of Blues patient, they also can't accept any more patients from the other Blues products or from other Blues plans, Patten says. Their Blues panels would be frozen at the current patient enrollments.

The exchanges will also attract some patients with existing insurance, which means that physicians may be forced to join an exchange plan to maintain coverage for existing patients if they want to retain those patients, Cindy Gillespie says. Premiums are expected to rise substantially next year, forcing owners of small companies to contemplate ending coverage. Under the ACA, most companies are required to cover their employees, unless they have fewer than 50 full-time workers.[10] To get below this threshold, Gillespie predicts that small companies will reduce workers' hours so that fewer are full-time, or simply lay off some workers.

Gillespie says there is another way your existing patients could end up in exchange plans. Low-wage workers covered by their company receive a subsidy that is well below what they will be able to get on the exchange. Exchange subsidies are available to people whose income is up to 400% of the federal poverty line, or roughly $45,000 for an individual and about $92,000 for a family of 4.[11] The CBO study estimates that 83% of exchange enrollees will qualify for subsidies and that the average subsidy will be more than $5000 per year.

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