A 2015 study by Consumer Reports found 30% of consumers surveyed with private insurance received a ‘surprise’ medical bill in the past two years where the insurer paid less than had been anticipated.1 23% of the surprise medical bills involved billing from doctors not expected by the consumer2 and 14% involved out-of-network rates billed for doctors that were thought to be in-network.3 DeAnn Friedholm, speaking for the policy and advocacy arm of Consumer Reports, has lamented, “Even if you go to a hospital in your network, the unfortunate truth is that there is no guarantee that all your treatment — whether it’s the radiologist, anesthesiologist or lab work — will be treated as in-network, leaving patients owing thousands of dollars they never anticipated.”4
Among the concerns regarding out-of-network care is not only the lack of insurance coverage but the fact that out-of-network care does not benefit from the negotiated rates of in-network care, making the out-of-pocket costs for out-of-network care all the more expensive for consumers. A 2015 study by the AHIP Center for Policy and Research found that the average out-of-network charges for the majority of 97 medical procedures examined “were 300% or higher compared to the corresponding Medicare fees” for the same services.5
A HealthPocket study on last year’s 2015 ACA plans sold on Healthcare.gov found that nearly 47.4% of the 2015 ACA plans sold on the Healthcare.gov exchange lacked standard out-of-network coverage. For those enrollees in plans without standard out-of-network coverage, it was typical that the insurer would not pay for any portion of out-of-network healthcare costs except in the event of a medical emergency (e.g. the enrollee has a heart attack while traveling) or if the plan is formally petitioned for out-of-network coverage and a prior authorization is then granted by the plan.
HealthPocket repeated the same analysis on recently released 2016 data for Healthcare.gov ACA health plans and found there was a 24 percent increase in the percentage of ACA plans that lacked standard out-of-network coverage as compared to 2015. Below are aggregate results for states using Healthcare.gov as well as percentages for the individual states using Healthcare.gov.
Percentage of Healthcare.gov Obamacare health plans that do not have out-of-network coverage:
2016 Exchange Plans
2015 Exchange Plans
Increase vs. 0% in 2015
2015 data not available
Increase vs. 0% in 2015
Increase vs. 0% in 2015
Increase vs. 0% in 2015
Across the states using healthcare.gov, 59 percent of 2016 ACA plans do not have out-of-network coverage, except when the enrollee has a medical emergency or obtains prior authorization from the plan before receiving out-of-network healthcare. In three states (New Jersey, New Mexico, and South Dakota), every 2016 ACA plan lacks out-of-network coverage.
While the majority of Healthcare.gov states had 2016 increases in the percentage of plans without standard out-of-network coverage, in eight states this percentage decreased in 2016 as compared to 2015. The Healthcare.gov states with declines were Arkansas, Delaware, Illinois, Iowa, Nevada, Oklahoma, Oregon, and Wyoming. Three states had no 2016 exchange plans without out-of-network coverage: Alaska, Arkansas, and Wyoming. Alaska also had no Healthcare.gov plans without standard out-of-network coverage in 2015.
Why Have Networks?
The discussion of in-network coverage versus out-of-network coverage raises the question, “Why have doctor and hospital networks at all?” A healthcare provider network is a means of controlling an insurer’s medical costs as well as directing enrollees to healthcare providers who meet the insurer’s quality criteria. Health plans can direct their enrollees to specific doctors, hospitals, pharmacies, and labs with whom they contract in exchange for favorable reimbursement rates for medical services delivered by these healthcare providers. Out-of-network healthcare providers do not contract with the health plan and, consequently, the health plan does not receive preferred rates from them. As previously noted, a recent study found the average out-of-network charges for the majority of medical procedures examined were three times or more than the Medicare fees for the same services.6
Healthcare provider networks come in different forms. Two of the most common network types are HMOs and PPOs.
Emergencies & Prior Authorization
When standard out-of-network coverage is not offered by a health plan, there are often two categories of exceptions: medical emergencies and prior authorization.
Definitions of medical emergencies can differ by state but they normally involve the sudden onset of severe medical symptoms.9 Under the Affordable Care Act, health plans cannot charge higher co-payments or co-insurance fees for medical care received from out-of-network emergency rooms.10
With respect to prior authorization for out-of-network medical care, a healthcare provider would typically complete a formal request on behalf of a patient and submit it to the patient’s insurer. The insurer, however, is not obligated to approve the request and the insurer also has the general economic incentive to direct care towards its in-network healthcare providers where it has negotiated reimbursement rates.
Within the scope of the Affordable Care Act, there were the laudable goals of expanding standard medical benefits within the market for privately purchased health insurance while eliminating application rejections for people with expensive health issues. Among the unintended consequences arising from the implementation of these goals is a significant increase in insurance coverage expenses11 and an increase in the use of narrow networks by exchange plans as a method to control costs.12 These narrow networks of doctors and hospitals can increase a consumer’s risk that the best care for a serious medical condition will be found out-of-network. In instances where this risk is realized, a lack of out-of-network coverage can leave consumers with a choice among accepting the limitations of their healthcare provider network, hoping prior authorization requests will be approved, or paying for out-of-network care on their own, perhaps at exorbitant rates, and without the protection of a cap on annual out-of-pocket costs.13
On-exchange Affordable Care Act individual & family plans in the states that use Healthcare.gov were examined within this study. Data for the 2016 Affordable Care Act health plans was obtained from the 2016 plan attributes public use file from CMS CCIIO in November 2015. Data for 2015 Affordable Care Act plans was obtained in September 2015 from the 2015 plan attributes public use file from CMS CCIIO.
A plan that covered providers outside of the provider network was counted as having out-of-network coverage unless the plan only offered out-of-network coverage for enrollees with emergencies or prior authorization from the plan. The analysis assumed the accuracy of the underlying government data.
1 Consumer Reports National Research Center. “Surprise Medical Bills Survey.” Consumer Reports. (May 5, 2015). http://consumersunion.org/wp-content/uploads/2015/05/CY-2015-SURPRISE-MEDICAL-BILLS-SURVEY-REPORT-PUBLIC.pdf. p.8. Last accessed November 13, 2015.2 Ibid.3 Ibid.4 “Consumer Reports survey finds nearly one third of privately insured Americans hit with surprise medical bills.” ConsumersUnion. (2015). http://consumersunion.org/news/consumer-reports-survey-finds-nearly-one-third-of-privately-insured-americans-hit-with-surprise-medical-bills/. Last accessed November 13, 2015.5 AHIP Center for Policy and Research. “Charges Billed by Out-of-Network Providers: Implications for Affordability.” AHIP. (September 2015). p.5. http://www.ahip.org/epub/OON-Report-2015/. Last accessed November 16, 2015.6 Ibid.7 Centers for Medicare & Medicare Services. “What You Should Know AboutProvider Networks.” CMS. (September 2015). https://marketplace.cms.gov/outreach-and-education/what-you-should-know-provider-networks.pdf. p.2. Last accessed November 13, 2015.8 Ibid.9 See http://publichealth.gwu.edu/departments/healthpolicy/CHPR/nnhs4/PCCM/subheads/pccm116.html. Last accessed November 16, 2015.10 “You also can use an out-of-network emergency room without penalty…Access to out-of-network emergency room services: Insurance plans can’t require higher copayments or coinsurance if you get emergency care from an out-of-network hospital. They also can’t require you to get prior approval before getting emergency room services from a provider or hospital outside your plan’s network.” Healthcare.gov. “Doctor choice & emergency room access.” Healthcare.gov. https://www.healthcare.gov/health-care-law-protections/doctor-choice-emergency-room-access/. Last accessed November 12, 2015.11 Kev Coleman & Jesse Geneson. “Without Subsidies Women & Men, Old & Young Average Higher Monthly Premiums with Obamacare.” HealthPocket. (October 29, 2014). https://www.healthpocket.com/healthcare-research/infostat/obamacare-2014-premiums-higher-than-pre-reform-market. Last accessed November 12, 2015.12 See articles such as Lena H. Sun. “Report: ACA plans have a third fewer providers than employer-based plans.” The Washington Post. (July 15, 2015). https://www.washingtonpost.com/national/health-science/report-aca-plans-have-a-third-fewer-providers-than-employer-based-plans/2015/07/15/6ee8ebf2-2b08-11e5-a250-42bd812efc09_story.html and Chad Terhune. “75% of Obamacare plans in California use narrow networks, study shows” Los Angeles Times. (August 25, 2015).http://www.latimes.com/business/healthcare/la-fi-obamacare-narrow-networks-20150825-story.html. Last accessed November 16, 2015.13 “Out-of-pocket maximum/limit…does not have to count balance billing amounts for non-network providers and other out-of-network cost-sharing.” https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/. Last accessed November 16, 2015.
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