While the national media focuses on the Affordable Care Act insurers that are requesting larger premium rate increases for their exchange plans in 2016, it's important to look between the lines and see which plans are not requesting double-digit hikes for 2016. I contend that the lion's share of these well-publicized rate increases are prelude to the introduction of more tightly integrated narrow-network products that will look like bargains in comparison.
The classic ?bait-and-switch? entices consumers to the store with the lure of bargains, but when they arrive they find those items sold out, or are pressured to buy up to a more expensive product. Think Black Friday or car dealerships. The insurers requesting big rate increases for 2016 may be doing just the opposite: jacking up the costs of existing products so that narrow-network products, typically featuring care integration, look more attractive.
We've already seen this happen in Medicare Advantage. In 2014, Highmark's $0 premium MA, Freedom Blue PPO HD, had a broad network that included rival UPMC. For 2015, premiums for the equivalent to Freedom Blue rose to $70, while the insurer's new $0 premium plan, Community Blue Medicare Signature, excludes UPMC from the network. Highmark still offers the broader network plan, but it gives a strong financial incentive to seniors to switch to the narrower network.
For 2016, Highmark has requested increases for many of its ACA-compliant commercial plans, generally percentage hikes in the 20s and 30s. But just this week, the insurer introduced to the Pittsburgh area a ?lower-cost? plan, Connect Blue, an exclusive provider organization with three provider tiers. The tier with the lowest cost burden includes Highmark's owned IDN, Allegheny Health Network, along with some independent hospitals. This product is so far only available to large groups, but don?t be surprised if it shows up on the 2016 exchange for individuals and small groups this fall.
I would expect many other commercial insurers to follow suit, requesting rate increases for their PPOs and HMOs with broader networks, and then keeping premiums level for existing narrow-network plans or introducing new insurance products that are tightly integrated with a specific health system. Insurers requesting double-digit premium increases usually cite higher-than-expected medical loss ratios; a more tightly controlled narrow network would be able to better manage costs as well as care.
UPMC?a mature integrated payer/provider network in its own right?did not request any double-digit hikes for 2016, and it offers some of the lowest-cost exchange plans in the nation. For more detail about how regionally significant IDNs will have a much stronger presence on the exchanges in the future, see my discussion of hospitals and IDNs in U.S. Healthcare 2015: Target Insight.
Since healthcare.gov is only publishing rate-hike requests of 10 percent or more, most media reports are naturally focusing on them. Also, since the "Obamacare is working" narrative doesn?t sell papers or induce mouse clicking, there has been little incentive to look deeper. This has created the perception that these requests are widespread, when in fact they are restricted to a handful of plans. In all of Pennsylvania, only four insurers are requesting double-digit increases for a combined 51 products (including those for both small groups and individuals); 46 of these are offered by Highmark or its recent acquisition, Blue Cross of Northeastern Pennsylvania. In Florida, five insurers have made requests for a total of 13 products; and in Texas, eight insurers have requested large increases for 22 total products.
Republican leaders see these rate increases as further confirmation of the perceived Obamacare disaster. At the America's Health Insurance Plans Institute 2015 in Nashville, Tennessee, last week, former Gov. Mitt Romney cited these rate requests as proof of a fundamental flaw in the Affordable Care Act, and claimed that Democrats would use these rate increases as an impetus to implement the public option or single payer.
As the health insurance exchanges mature, insurers have noted the tolerance that consumers are gaining for narrow networks, as long as there are cost savings in premiums. Containing members within a specific healthcare ecosystem, where care is coordinated by a medical home and restricted to a tightly integrated network, may prove to be the most efficient way to not only restrain costs, but also improve quality.
Follow Mark Cherry on Twitter @MarkCherryDRG

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