Local medical labs and pathology groups are often excluded from narrow networks. Thus, another round of “network provider reduction” is a serious issue
Total enrollment in health insurance products may be increasing, but in its recently-issued study, McKinsey and Company determined that the Health Insurance Marketplace (Health Exchange) is shrinking even as the number of enrollees continues to rise.
The development is unfavorable to the nation’s clinical laboratories and pathology groups because fewer health plans on the exchange means less access to patients. It also means that the remaining health insurers are taking steps to further narrow their existing networks in order to curb expenses by limiting options.
The new report published by McKinsey and Company reveals that insurers are moving towards plans that offer fewer options for consumers, mostly due to losses suffered on the health exchanges. The report, titled, “2017 Exchange Market: Plan Type Trends,” states that in 2017 a majority of the healthcare plans (about 75%) available to consumers under the Affordable Care Act (ACA) will be Health Maintenance Organizations (HMOs) and other similar limited-option plans, such as Exclusive Provider Organizations (EPOs).
EPOs are a hybrid of HMOs and PPOs and share some common options from both. Of the states investigated, McKinsey found that about 15% of customers eligible for ACA exchanges will have no PPOs available to them.
HMO versus PPO versus EPO Plans
McKinsey and Company is a management consulting firm that analyzes and evaluates management decisions and provides strategic advice to major organizations worldwide in both the public and private sectors. Their business market includes many of the largest corporations in the world, as well as government agencies and non-profit organizations.
McKinsey and Company evaluated the regulatory filings for 18 states and the District of Columbia for the report. The 18 states examined included Colorado, Indiana and Washington, which represent about 40% of exchange-eligible health consumers. According to the report, the insurance offerings in these states have mirrored national trends in the industry. The McKinsey analysis also discovered that 17% of Americans eligible for an ACA plan will only have one plan available in 2017. Last year, only 2% of ACA-eligible residents had just one choice in insurance plans.
HMOs and EPOs typically provide consumers with a small network of healthcare providers and hospitals that are covered under the plans. Some HMOs and EPOs cover costs associated with only one hospital system and its affiliated physicians and facilities.
EPO plans are a combination of HMO and PPO plans, offering the flexibility of a PPO and the savings of an HMO. With this type of plan, consumers do not need to choose a primary care physician and they do not need a referral to see a specialist. However, out-of-network costs are only covered in emergency situations.
The McKinsey analysis also found that just one quarter of the insurance plans available next year under the ACA will offer a broader set of choices to consumers, such as PPOs. PPOs, for example, do not require policyholders to select a primary care physician, and enrollees can see any healthcare professional without a referral inside or outside of the network. Choosing professionals inside the network, though, means lower copays and a greater coverage of services.
The number of managed plans like HMOs and EPOs are increasing, while the numbers of unmanaged plans like PPOs decline. HMO plans represented 64% of the exchange offerings in 2016 and 55% of the exchange offerings in 2015.
Less than Half of Exchange Customers Will Find Plans They Can Afford
The report also predicts that, while more than half of consumers will have access to an unmanaged plan in 2017, only 40% will be able to find one at an affordable price. Analysts believe that the tendency for health insurers to offer fewer PPO plans will likely continue due to their higher costs, since less healthy enrollees are more inclined to choose PPOs for their flexibility.
Earlier this year, the largest health insurer in the United States, UnitedHealthcare, announced that it will be withdrawing its participation in the health exchanges in 2017. Aetna has also announced that in 2017 it will stop selling exchange policies in 11 of the 15 states where it currently operates. Both companies cited huge losses due to policyholders being costlier than expected as the reason for the departures.
Narrow Networks Exclude Clinical Labs and Pathology Groups
Network provider reductions may have serious repercussions for the clinical laboratory industry since local labs and pathology groups are often excluded from narrow networks, as insurers seek low-cost providers and services to control costs and keep premiums as low as possible for consumers.
To stay competitive and successful, labs must employ methods to better manage costs while developing ways to add value for both physicians and patients, such as giving payers enriched lab test data that helps manage patient care and outcomes.