Tiered health plans cutting costs, restricting options
Told he had an aggressive form of prostate cancer, Glenn McCarthy faced a decision this year.
He could make a $1,000 copayment and have surgery at Brigham and Women’s Hospital in about two weeks. Or he could wait more than a month for an opening at Faulkner Hospital, paying just $150 for the same procedure by the same surgeon.
His doctor advised against a delay.
“It was life or death,’’ said McCarthy’s wife, Tracy. “We really didn’t have a choice.’’
McCarthy, 48, of Weymouth, is back at work as an insulation installer. But he is still recovering from his out-of-pocket costs, which totaled more than $4,500 after there were surgical complications.
The expenses were dictated by his “tiered network’’ health insurance, a kind of plan that ranks hospitals and doctors by cost and quality measures and assigns patients’ payments with costs in mind.
More Massachusetts employers and consumers are embracing such plans - along with other “limited network’’ plans that restrict members to certain providers and require them to pay higher rates for out-of-network care - in an effort to stem the rising cost of health insurance by directing patients to lower-cost hospitals.
Some hospitals ranked as higher-priced by insurers say the trade-off is risky. Patients on tiered or limited network plans are sometimes denied the specialized care more expensive hospitals provide, they argue, and are sent to lower-cost providers with less experience in critical areas such as pediatric and cancer care.
“They present one of the greatest threats to access that there is in the Commonwealth right now,’’ said Dr. James Mandell, chief executive of Children’s Hospital Boston.
Mandell said some Children’s patients have been told by insurers that they cannot continue treatment at the hospital because of insurance restrictions. “These plans have severe potential to limit care for the most disadvantaged,’’ he said.
But after a decade of double-digit annual health premium increases, Massachusetts businesses are eager for insurance options that can lower costs for employers and, by extension, workers.
“Part of the reason for these high health care costs is that a lot of routine health care is delivered at high-cost academic medical centers,’’ said Richard C. Lord, president of Associated Industries of Massachusetts, a trade group representing 6,000 businesses.
“We’ve lived in a health care system that promoted total freedom of choice, and that’s just not affordable anymore,’’ he said.
Tiered and limited network plans are not new, but last year the Legislature passed an amendment to the state’s 2006 health care overhaul that requires insurers to offer them, with premiums that are priced at least 12 percent below their standard plans. They now make up as much as 15 percent of the Massachusetts health insurance market, industry leaders estimate, and Lord expects that share to grow over the next two years.
Insurance that ties premium prices to where patients get care received an added boost in the spring, when the Group Insurance Commission, which administers health plans for state employees and some municipal workers, made a strong push for limited network options.
Increasingly, the choice is between more affordable premiums that place some restrictions on access and “broader access to any provider, but you pay more,’’ said Jon Kingsdale, a health care consultant and managing partner in the Boston office of Wakely Consulting Group.
In July, the Massachusetts Health Connector - the agency that manages the marketplace for state-subsidized medical insurance - began enrolling those who qualify for fully subsidized insurance in limited network plans offered by Network Health and CeltiCare. The change kept the program open to everyone who qualified, despite a flat budget and an increase in enrollees, said the agency’s executive director, Glen Shor.
Tufts Health Plan, which recently acquired the Medicaid managed-care plan Network Health from Cambridge Health Alliance, sells several tiered and limited products, and has teamed up with Steward Health Care System to offer a new one for small businesses. Harvard Pilgrim Health Care and Fallon Community Health Plan are also in the market.
Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, offers two tiered plans, including the one in which McCarthy is enrolled. Although tiered network insurance represents just 8 percent of the Blue Cross business, the plan it unveiled last January is its fastest-growing product ever, with 76,000 members.
Advocates of the plans consider them particularly important for small businesses.
“Part of the reason why employers and consumers are looking at these products more today than they may have in the past is because they are struggling with the cost of health care,’’ said Eric Linzer, senior vice president at the Massachusetts Association of Health Plans, a trade association for insurers.
As the number of people with tiered and limited-network insurance increases, so does the backlash. Children’s and nearby Dana-Farber Cancer Institute, both Harvard-affiliated teaching hospitals, asked state insurance regulators to exempt them from the higher-priced tiers. Those efforts failed, and they have now appealed to lawmakers for legislation that would allow more patients access to their medical care. The hospitals argue that their specialties are not properly reflected in the insurers’ criteria for setting the tiers.
“The approach to tiering is supposed to be based on quality and values,’’ said Dr. Edward J. Benz Jr., chief executive of Dana-Farber. “The problem is that the metrics being used aren’t relevant to cancer.’’
Tiered and limited-network plans are also channeling more patients to lower-cost hospitals that have long contended they provide equal or better care than hospitals that command higher rates from insurers.
“Tiered products fit in here, and really represent what we do and what we’re able to do in the market, which is high quality at a lower cost,’’ said Brooke Tyson Hynes, vice president at Tufts Medical Center.
But for patients who opt for higher-tier hospitals, such as McCarthy, there can be a steep price to pay. Following his prostate cancer surgery at Brigham and Women’s - and the $1,000 out-of-pocket cost - he was admitted to South Shore Hospital in Weymouth because of a complication. Because South Shore is also a ranked in a higher tier by Blue Cross, McCarthy had to pay more for his care there. In the end, his expenses topped $4,500.
The McCarthys appealed to Blue Cross in July, arguing they had no choice but to move forward quickly on the surgery. “The deductible and copayment are your member cost shares and they cannot be waived,’’ Blue Cross wrote to them.
“It’s just ridiculous,’’ said Tracy McCarthy, who said she frequently fields calls from the hospitals’ collection departments while making payments in $5 increments. “Obviously, if we had the choice and the time, we would have chosen the lesser-priced hospital.’’
A Blue Cross spokeswoman, Tara Murray, would not discuss the McCarthys’ case but said the insurer has launched a campaign to educate members on their choices under tiered plans.
“In cases where members are concerned they may have limited cost-effective options, we encourage them to engage their caregivers in discussions about their choices for care and implications on their out-of-pocket costs,’’ Murray said. “Members can also call us if they have questions or want guidance on their various choices.’’
Health Care for All, a Boston consumer group, wants tiered network plans to disappear. The nonprofit said callers to its insurance help line complain they have been forced to stop using their longtime physicians because the doctors are in a higher-cost tier.
“It really is dividing the system into the haves and the have-nots,’’ said Amy Whitcomb Slemmer, executive director of Health Care for All. “People who can pay for the higher tier, can pay more for office visits, will be able to maintain the choice and access.’’