Insurance Commissioner’s Statement on Centene’s Acquisition of Health Net

California Insurance Commissioner Dave Jones issued a statement on Centene’s acquisition of Health Net. The following is a summary of his comments:

This transaction provides an opportunity to bring new capital and resources from a major national health insurer largely outside of California (Centene) to enable a California health insurer (Health Net) to continue to compete and offer consumers additional choices in California’s individual, small group, and large group commercial health insurance market. The conditions for my approval of this merger include the following:

  • Merger costs will not be imposed on California policyholders.
  • Health Net will maintain and grow its commercial line of business. There are growth commitments and investment requirements to ensure that Centene continues to invest substantially in Health Net Life and that both companies seek to expand Health Net Life’s present competitiveness in California’s individual, small group and large group health insurance markets.
  • Health Net Life will continue to offer products through Covered California.
  • Centene and Health Net must provide sufficient networks of medical providers and timely access to medical providers and hospitals.
  • Centene and Health Net must improve the quality of care delivered through their health insurance.
  • Health insurance rates will be developed using the same methodologies used before the merger, but with an agreement that rate increases will be kept to a minimum.
  • An adequate distribution channel for Health Net health insurance must be maintained.
  • Senior management for Health Net’s California operations must remain in California and restrictions are placed on Centene’s ability to re-domesticate or move Health Net out of state.
  • Centene will invest further in California by making a $200 million infrastructure investment by establishing a California call center, bringing new jobs to California.
  • Centene and Health Net will invest an additional $30 million in California’s low and moderate income

Health Net has had declining market share and covered lives in its commercial health insurance business. The merger with Centene gives Health Net access to the capital and resources to compete in a California market that’s dominated by three much larger health insurers (Kaiser, Anthem Blue Cross of California, and Blue Shield of California) and several other national health insurers (United Health Care, Aetna, Cigna).

State Finalizes Medical Provider Network Rules

The California Dept. of  Insurance has issued final regulations that include requirements for health insurers to create and maintain adequate medical provider networks. “These regulations go into effect immediately because they address a number of critical problems consumers have faced with insurers when seeking timely access to care,” says Insurance Commissioner Dave Jones. He had issued temporary emergency regulations, which have been in effect since late January 2015. The regulations require health insurers to do the following:

  • Include enough numbers and types of providers in the network to deliver covered services.
  • Adequately provide for the treatment of mental health and substance use disorders.
  • Include an adequate number of primary care providers and specialists with admitting and practice privileges at network hospitals.
  • Monitor and adhere to new appointment wait time standards.
  • Regularly report information about the networks and changes to the networks to the Dept. of Insurance for review.
  • Maintain accurate provider network directories available to the public and update them weekly.
  • Arrange out-of-network care at in-network prices when there are insufficient in-network care providers.

How Major Players Are Driving Regional Networks

healthcare copyFollowing implementation of the Affordable Care Act, large players are consolidating the control of hospitals and physician organizations in the San Francisco Bay area, according to a recent report by the California HealthCare Foundation (CHCF).

In a region with many segmented submarkets, major providers are expanding to manage care efficiently, serve more patients, and compete with Kaiser Permanente. The number of independent hospitals is shrinking as financial problems mount. Independent practice associations are seeking to diversify, raise capital, and keep private practice viable, especially for primary care physicians. Though none of the region’s remaining private safety-net hospitals appear threatened by imminent closure, several face an uncertain future. The safety net is strong, but faces capacity and access challenges resulting from Medi-Cal expansion. Safety net providers are particularly hampered by their limited ability to recruit and retain clinicians. For more information, visit www.chcf.org/almanac.

Americans Want More Transparency in Health Plan Data

The ACA requires plans to disclose how often claims are denied or appealed, the availability of network providers, and what consumers will pay out-of-pocket for care out-of-network. Under the law, transparency reporting requirements were to take effect in 2010 for plans outside of the marketplace and in 2014 for marketplace plans. But these provisions have not yet been implemented. A recent notice proposes to delay implementation further, though it has not yet been finalized, according to a report by the Kaiser Family Foundation.

The public largely supports requiring health insurance companies to release data points, including data on the availability of in-network doctors and hospitals (84%), data on how often claims are denied or appealed (83%), data on how quickly the company pays claims (82%), and data on what a typical person pays to see a doctor who is not in the plan network (73%). Seventy percent say they would be at least somewhat likely to this information when shopping for a health insurance plan.

The Problem of Inaccurate Provider Directories

Health plans have been creating contracted network offerings at an unprecedented rate since the implementation of the Affordable Care Act (ACA). But some consumers are complaining that the provider network information from their health plan is misleading and inaccurate, according to a report by Berkeley Research Group. As a result, new federal and state regulations require health insurers to maintain and provide consumers with an accurate listing of providers, facilities and physicians participating in their networks. The repercussions of inaccurate provider directories can be significant, posing risks to consumers and health plans.

Inaccurate directory information may limit a consumer’s ability to verify if a preferred doctor is in-network or to know how many and what types of providers would have to be accessed under a particular product offering. Additionally, the consumer may be at risk of being charged higher out-of-network rates when providers are erroneously listed as being in-network. These inaccuracies also put health plans at greater risk of litigation, government penalties, and investigations, and significant administrative costs associated with rectifying inaccurate directories.

Consumers typically use provider directory information to make decisions in real time. However, the frequency with which health plans update their provider directories varies significantly. Many states only require an annual update. Additionally, states must decide whether penalties should be imposed on health plans when directories have errors, particularly when patients incur out-of-network costs because of it. Regulators may also require health plans to allow consumers to re-enroll in a new health plan if their provider has been misrepresented in a provider directory.

However, variation also exists across health plan types, with HMOs being the most regulated with respect to network adequacy, followed by PPOs and EPOs.  In a study published by JAMA Dermatology, researchers at the University of California, San Francisco, tried contacting 4,754 dermatologists listed in the three largest Medicare Advantage plans in 12 metro areas. Nearly half of the names were duplicates, and only about half the remaining—26% of the total—were at the listed address, accepted the plan and were offering appointments. The California Department of Managed Health Care (DMHC) performed a survey of Blue Shield of California showing that a significant percentage (18.2%) of the physicians listed in the directory were not at the location listed in the provider directory and that a significant percentage (8.8%) were not willing to accept patients enrolled in the plan’s Covered California products, despite being listed on the website as doing so.

Anthem customers filed 176 complaints on network issues FROM January 1 to August 31, 2014, and Blue Shield saw 130 complaints. A study into the availability of providers in the Medicaid Managed Care program performed by the Department of Health and Human Services’ Office of Inspector General offers perhaps the most glaring results. Forty-three percent of providers were not participating in the Medicaid managed care plan at the listed location and could not offer appointments. Thirty-five percent of providers could not be found at the location listed and were therefore not participating at the location listed by the plan. Another 8% of providers were at the location listed but said that they were not participating in the plan. In some cases, these providers had participated in the plan in the past; in other cases, the providers had never participated in the Medicaid managed care plan.

Health plans find it increasingly difficult to maintain accurate participating provider information in their provider directories for reasons including the following:

  • Increasing complexity in the insurance products being offered to customers.
  • The dynamic nature of participating provider information.
  • Limited resources to maintain provider directories.

One reason is that health plans are attempting to lower costs by constructing provider networks that include only certain providers within a health system. A 2014 McKinsey study of products being sold on the ACA health insurance exchanges describes partial health system participation. The study found that Forty-four percent of ultra-narrow, silver-tier products exclude at least one hospital from every single participating health system. Another 31% of the products exclude at least one hospital from at least one health system. The costs for such ultra-narrow networks are 13% lower. But these arrangements add complexity to the process of capturing the relevant information in a health plan’s provider system and ensuring that these data are propagated correctly to its provider directories. Third, a provider practicing multiple specialties or at multiple locations may be participating with a health plan for only one specialty or at one location.

Any time one piece of information for a provider listed in a health plan directory changes, the entire directory is technically inaccurate until it is updated with the accurate information. The process required by a health plan to maintain accurate participating provider information in its provider directories is complex and requires substantial resources. All of this must be performed by health plan resources that are often limited and subject to medical loss ratio (MLR) requirements.

AMA Addresses Problems with Narrow Networks

As open enrollment for the health insurance exchanges gets underway, the American Medical Association (AMA) has adopted a new policy to address inadequate networks. The AMA wants insurers to make provider terminations without cause before the enrollment period begins. The AMA says that inaccurate or late revised provider directories are leaving patients stuck with plans that dropped their physicians after they enrolled. The AMA says that new physicians should be able to be added to a network at any time. Also, health plans need to give patients an accurate, complete directory of participating physicians through multiple media outlets, which includes identifying providers who are not accepting new patients. AMA president Robert Wah, MD said, “Patients who need to seek care out-of-network should not be punished financially. If patients find themselves in networks that are deemed inadequate, there should be adequate financial protection in place to ensure they can access the care they need and deserve…As enrollment opens for health insurance exchanges, patients deserve to have an honest look at their coverage options including the physicians, hospitals and medications they will have access to as well as cost-sharing so that they can make an informed choice.”

The AMA says the following:

  • If the patient’s plan is deemed inadequate, insurers should treat visits to out-of-network physicians the same as visits to in-network physicians.
  • There should be a way for patients to file formal complaints with regulators about network adequacy.
  • The AMA supports regulation and legislation that would require out-of-network expenses to count toward annual deductibles and out-of-pocket maximums when a patient is enrolled in a plan with out-of-network benefits or is forced to go out-of-network based to get care.
  • State regulators should enforce network adequacy requirements so that patients have access to adequate provider networks throughout the plan year.
  • Insurers should submit public reports, at least quarterly, to state regulators on several measures of network adequacy, including the number and type of physicians who joined or left the network,  essential health benefits that are provided, and consumer complaints.

For more information, visit www.ama-assn.org/go/aca.

Covered California Update

CoveredCAAnnouncementCOBRA Recipients Get Another Chance to Sign Up for the Exchange
At a recent board meeting,Covered California’s executive director, Peter Lee outlined what to expect with the state’s exchange over the next couple of years. He announced a special enrollment period for COBRA enrollees. On May 15, Covered California launched a limited-time special-enrollment period for people who have COBRA health insurance and would like to switch to an exchange plan. They will be eligible to buy coverage through Covered California until July 15.  “Since the passage of the Affordable Care Act, plans in the individual market could be preferable to COBRA coverage because of premium assistance and cost-sharing reductions…For some people who have COBRA coverage, purchasing a plan in the Covered California marketplace…could save thousands of dollars a year,” he said in a press release. At the board meeting, Lee explained that many people missed the open enrollment deadline because they found it difficult to compare the two types of coverage. Lee said that Covered California is telling COBRA recipients, “Don’t try to do this alone.” They are encouraged to get help from navigators and agents, whom Covered California has been busy training to help with COBRA issues.

Don’t Expect Major Changes to Covered California Until 2016
Lee said that Covered California is not expecting to make major changes in 2015. “We will continue to make sure that networks are adequate and that networks are not shrunk or changed…We need product consistency so renewal can be as smooth as possible. We expect minimal changes to our contracts with plans.” Lee said that Covered California will revisit model contract issues for 2016. “We think that there will be significant issues, such as how to look at benefit design and consumer understanding of coinsurance and copayments as well as issues of contract terms.”

Networks to Expand
Lee said that carriers are greatly expanding their networks in Covered California. Blue Shield has expanded its network significantly over past 12 months. He said that 65% of doctors in the company’s global broad PPO network are now serving enrollees in Covered California as well as individual enrollees outside of Covered California. Health Net has expanded its doctor network by 58% since Jan. Brad Johnson of the California Medical Assn. said that, under Covered California, doctors are having problems finding specialists and specialty facilities for referrals. Julianne Broyles of California Health Underwriters said, “From our meetings with our members, over the past few days, the issue of network adequacy has certainly come up as one of their top concerns that they are hearing from their clients.”

Enrollment
Lee said that Covered California expecting to have the next open enrollment available from November 15 to February 15. “We will have three months to renew a million people and hopefully sign up 500,000 more. It is a lot of work,” he added. Sixty percent of the people who have enrolled agreed to let Covered California use their financial data to automatically check their eligibility.” Covered California expects to have 1.2 million enrollees who have paid their premium by May 2014, increasing to 1.7 million by April of 2015, and 2 million by April 2016.

Medicare Preferred Pharmacy Networks Offer Big Savings

Preferred pharmacy networks will reduce federal Medicare Part D costs up to $9.3 billion during the next 10 years, according to a study by Milliman for the Pharmaceutical Care Management Association (PCMA). “It was never in question that seniors love low-premium, low-copay Part D plans with preferred pharmacy networks. Now this game-changing study shows that preferred pharmacy networks save the federal government billions as well,” said PCMA President and CEO Mark Merritt.

The study includes these major findings:
* Preferred pharmacy network plans are expected to reduce federal Medicare spending by about $870 million in 2014.
* Over the next 10 years, preferred pharmacy network plans are expected to reduce federal Medicare spending by $7.9 to $9.3 billion.
* The largest two-year decrease in federal direct subsidies in the history of the Part D program coincides with the rapid adoption of preferred pharmacy network plans and the increased use of generic drugs.
* Post point-of-sale price concessions cause a greater reduction in federal Part D costs than equivalent drug discounts at the point-of-sale.

Separately, Part D seniors in plans with preferred pharmacy networks are overwhelmingly satisfied, citing lower costs, convenient access to pharmacies and other benefits, according to a survey from Hart Research Associates. The survey found that 85% of seniors surveyed are satisfied with their preferred network plan. In addition, the survey found that four in five seniors would be disappointed if their preferred network plan is eliminated.

According to a recent analysis of Part D data, more than 70% of Medicare Part D plans will feature a preferred pharmacy network in 2014. There are more drugstores in the U.S. than McDonald’s, Burger Kings, Pizza Huts, Wendy’s, Taco Bells, Kentucky Fried Chickens, Domino’s Pizzas, and Dunkin’ Donuts combined, creating a highly competitive environment.

More Networks Exclude Pricey Hospitals

Employers are increasingly willing to choose networks that exclude prestigious high-priced research institutions, according to a report by HealthLeaders-InterStudy. The state’s health insurance exchange, Covered California, will only intensify the trend toward narrow networks since most health plans have excluded these research institutions from their exchange networks.

Los Angeles is already is preparing for models that benefit large delivery networks. The City of Los Angeles’ decision to choose an Anthem Blue Cross HMO illustrates this trend. The arrangement excludes physicians from Cedars-Sinai Medical Center and UCLA Health System in order to eliminate referrals to those more expensive hospitals.

Jenny Kerr, market analyst at HealthLeaders-InterStudy said, “We expect pressure on the high-priced, academic hospitals in the market to reconsider pricing. Employers are sending a message that they are no longer willing to pay for hospitals that charge higher rates for routine services to cover costs of their teaching and research missions.”

The growth in accountable care organizations (ACOs) is another key driver in this trend. Los Angeles has 23 ACOs, which is the most in the state and the second most in the nation. Kerr said, “The rapid creation of ACOs, which are primarily physician-led in this market, means that physicians will be incentivized to prescribe the most effective medication rather than the least expensive to ensure quality outcomes.” For more information, visit www.hl-isy.com.

Last Updated 10/20/2021

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