Coming to your state soon: A two class medical system

Some health networks drop elite hospitals
Once unthinkable, now a trend as costs soar
By Liz Kowalczyk, Globe Staff
Health insurers are starting to sell policies that largely bar consumers from receiving medical care at popular but expensive hospitals such as Massachusetts General and Brigham and Women’s — a once radical idea that is gaining traction as a way to control soaring health care costs.
Governor Deval Patrick and Senate President Therese Murray have included such restricted provider networks in their recent legislative proposals to control rising insurance rates. And the state this month began offering limited-network plans to 300,000 state employees, retirees, and their families, promising 20 percent discounts on premiums if they are willing to give up access to some of the Boston area’s most renowned hospitals.
Dolores Mitchell, executive director of the agency that oversees health insurance for state employees, said she wants “to send a message to the more expensive [provider] organizations that, ‘Hey, we’re not going to just sit still and do nothing’ ’’ as medical costs climb year after year.
But even as state officials promote the idea, there are obstacles to its wide adoption. Some of the state’s largest insurers have contracts with powerful teaching hospitals and doctors’ groups that could make it difficult to exclude them. And Massachusetts consumers and employers have long cherished choosing from a broad range of providers.
In a yearlong investigation into rising health care costs completed last month, Attorney General Martha Coakley cited ‘’distorted’’ contracting practices as one factor. She found that providers with market clout have negotiated clauses in their contracts that prohibit or inhibit insurers from creating plans intended to steer patients away from them. She did not name the companies involved, but said regulators and lawmakers should move to discourage or forbid these practices.
Certain providers “are strong enough to dictate which products get into the market,’’ agreed Rick Weisblatt, senior vice president for health services at Harvard Pilgrim Health Care, the state’s second largest insurer.
Harvard Pilgrim, Weisblatt said, has contracts with a small number of influential teaching hospitals — which he would not identify because of confidentiality agreements — that include ‘’opt out’’ clauses. These could allow the providers to drop out of plans they don’t like, such as those that try to steer patients to less expensive community hospitals for routine services or to free-standing imaging centers for scans. As a result, the insurer has not widely offered these types of plans, he said.
Blue Cross and Blue Shield of Massachusetts, the state’s largest health insurer, has similar provisions in its contracts with Children’s Hospital Boston and Partners HealthCare, the parent organization of Brigham and Women’s and Mass. General. The language in Partners’ contract, said Andrew Dreyfus, executive vice president of Health Care Services, requires Blue Cross to develop specific exclusion criteria based on cost or other factors if the insurer decides to leave Partners hospitals out of restricted networks.
But he does not believe this clause would hamper Blue Cross from offering a plan with a limited network, which the giant insurer is now considering selling.
In Massachusetts, private insurers typically offer wide-open networks, meaning members can check into a pricey teaching hospital to deliver a baby rather than go to a less expensive community hospital, and can schedule MRIs and CAT scans in a hospital outpatient department, even when freestanding clinics provide similar services for less money.
Amid intense scrutiny into why health care costs in Massachusetts are climbing 7.5 percent a year, limited networks have emerged as the most immediate way to control costs. The governor and Murray have proposed legislation that would require insurers to offer limited network plans to small employers, plans that must be at least 10 percent cheaper than open networks.
Mitchell’s agency, the Group Insurance Commission, required its two largest providers — Harvard Pilgrim and Tufts Health Plan — to develop restrictive networks this spring. Speaking during the hearings about insurers and their lack of clout with certain providers, she said, “I’m trying to put a little cement in their backbones.’’
The limited network Harvard Pilgrim developed for the state excludes Partners’ Boston teaching hospitals and the Lahey Clinic in Burlington, while the Tufts network excludes Partners teaching hospitals, Lahey, Beth Israel Deaconess Medical Center, and UMass Memorial Medical Center.
Mitchell acknowledged that restricted plans could lead to problems in the market, if healthy employees migrate to cheaper plans and those with serious illness remain in more expensive open networks because they need broad access to the advanced care provided at teaching hospitals. That outcome could raise costs for individuals in the open plans, since costs would be spread among fewer employees.
Partners spokesman Rich Copp said the organization, whose teaching hospitals could be left out of other restricted networks as well, is concerned about making sure patients have adequate access to all services, including psychiatry and rehabilitation care. These services are poorly reimbursed and many providers have stopped offering them, he said.
Insurers say their plans generally allow customers to get permission to go outside a network if the care they need is not provided by participating hospitals and doctors, though sometimes they have to pay more.
Membership in limited networks is small so far, but they are gaining popularity.
Fallon Community Health Plan, based in Worcester, has seen enrollment in its limited network grow 40 percent since 2006. It has 50,000 members, nearly one-quarter of the insurer’s enrollment, who get a 10 to 13 percent discounts on premiums. Members must go to community hospitals unless they obtain preapproval to go to a teaching hospital for care not available elsewhere. Since most of the plan’s members live in Central Massachusetts, it might be less of a sacrifice for them to give up unrestricted access to Boston’s teaching hospitals.
Tufts has seen modest but steadily increasing enrollment — about 3,000 members — in its Select network offered for lower-income residents.
Caritas Christi HealthCare began offering a limited network to its employees in 2008, including only Caritas hospitals for most care and Boston Medical Center and Children’s Hospital for certain specialty care. While the plan started slowly, once Caritas dramatically lowered the price of joining — $32 a month for individuals compared with $150 for the open-network plan — it took off, and now has 2,300 employees plus their families.
Cindy McGrath, a state employee who joined a restricted-network plan last year and this week began running open enrollment clinics for state workers, said they are far more interested in limited networks than they had been in the past.
Health care “is a much bigger chunk out of their paycheck right now,’’ she said, “and [these networks] are a great deal.’’