The city of San Diego last month took the unprecedented step of suing three of the country’s biggest health insurers for failing to maintain accurate provider directories. Not only did the directories fail to provide consumers with up-to-date information on in-network providers, they also included “ghost networks” of doctors and other providers that were not in the insurers’ networks at all.
The San Diego lawsuits against Kaiser Permanente, Molina and HealthNet (a subsidiary of Centene) are just the latest example of the challenges people with insurance face when trying to determine how they can get the care they need, from the providers they prefer, without having to pay thousands of dollars out of their own pockets before their insurers will pay a dime.
Those San Diego provider networks weren’t just a little bit wrong. According to the lawsuits, HealthNet, Kaiser and Molina’s directories had error rates of 18%, 19% and 58% respectively, despite the fact that California law requires insurers to keep their directories accurate and up to date.
Networks promise more patients – for lower rates
One of the big obstacles Americans with insurance face is having to deal with ever-changing provider networks, something we didn’t have to worry about as recently as the 1980s. Before the rapid shift to managed care from indemnity health insurance policies in the ‘80s and ‘90s, Americans could go to any doctor or healthcare provider that accepted privately insured patients, and just about every provider did, much like almost all U.S. doctors accept patients enrolled in the traditional Medicare program. (Unlike privately operated Medicare Advantage plans, traditional Medicare does not maintain provider networks.)
Things changed quickly, though, when health insurers and their employer customers began embracing HMOs, PPOs, and other types of managed care plans, all of which sharply reduced the number of healthcare providers in their network. The rationale was that health insurers could better control healthcare costs if they contracted with only a select number of providers in a given market. In exchange for more patients, the providers agreed to get paid less per patient.
Soon, though, many insurers shrank their networks so drastically—and changed them so frequently—that those doctors, hospitals, and patients began to protest.
I remember vividly the intense backlash in Connecticut when Cigna decided to shake up its provider network in the Hartford area in the early 1990s by eliminating one of the city’s biggest and most popular hospitals. That business decision became a PR nightmare for my team and me when the Hartford Courant caught wind of it. Internally, we referred to the disruption as “blowing up” the network, and we felt empowered by our corporate customers to do the blowing up.
As the Courant reported in 1994, “A few years HMOs and other health plans, jockeying for position, courted doctors. Now a new phase is beginning, (doctors) say, one in which health plans are pruning their ranks and concentrating their control over doctors.”
What happened in Hartford was not an exception. Cigna and other big for-profit insurers blew up their networks whenever medical claims began rising to the point that executive deemed them a threat to profits.
Eventually, though, corporate customers began to push back because their employees were complaining about having to switch doctors and not being able to go to the hospital of their choice. As a consequence, insurers felt compelled to include the hospitals in their networks, even though their number crunchers had targeted them for elimination.
When the Affordable Care Act was passed in 2010, however, narrow networks came back in vogue—at least on the Obamacare exchanges where people who were not eligible for employer-sponsored insurance could shop for individual and family coverage.
As Modern Healthcare reported in 2015, about 70% of plans sold on those exchanges in 2014 had limited networks. According to a study at the time by McKinsey & Co., premiums for plans with narrow networks were on average 17% cheaper than plans with broader networks. Consequently, people looking for the lowest premiums gravitated toward the plans with the smallest provider networks.
The latest tactic: Mid-year rate cuts
Employer-sponsored plans, by contrast, typically still have somewhat broader networks with most hospitals included, but some insurers have found ways to limit patients’ choice even if their hospital of choice is in network.
Perhaps not surprisingly UnitedHealth has been especially aggressive in limiting patient choice even at hospitals in the company’s network. Early last year, just as the country was bracing for a pandemic that would send hundreds of thousands of Americans to the hospital, United began notifying hospital-based physicians in numerous markets—ER doctors, radiologists and anesthesiologists in particular—that their contracts would be terminated without cause if they didn’t agree to much lower reimbursement rates, forcing many of the doctors to accept pay cuts of up to 60%. If they didn’t agree to United’s demands, they would be relegated to out-of-network status.
An untold number of the physician groups decided to go out of United’s network. The result? United’s health plan enrollees can be admitted to a hospital that is in network but find out when unexpected bills start rolling in that the doctors that treated them were out of network.
In other words, patients need to be aware that provider directories may become inaccurate through inattention or sloppiness, but also because insurers are constantly blowing up their networks throughout the year. Your doctor or hospital might have been listed, accurately, as in network when you enrolled in your health plan but out of network now.
How do insurers get away with this? Lax oversight and by getting bigger and more powerful through mergers and acquisitions.
Which brings us back to the lawsuit in San Diego. By fire or by force, payors have manipulated provider networks to the point that they are essentially useless, and regulators are starting to take note. Patients and healthcare providers are paying a steep price because of these strongarm tactics, and more oversight is desperately needed.