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Final insurance exchange rule prompts concerns about out-of-network care

Flexibility for states to customize their insurance marketplaces wins praise, but some worry that networks could become too restrictive.

By Charles Fiegl — Posted March 26, 2012

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Federal officials have finalized regulations to guide states during the development of the health insurance exchanges that millions of Americans will count on to purchase coverage starting in 2014, as authorized by the health system reform law.

Overall, initial reaction to the 644-page rule's release on March 12 was positive. Health care organizations generally praised the Dept. of Health and Human Services for maintaining state flexibility in the rule, but some groups were critical of provisions designed to govern the adequacy of networks of physicians and other health professionals.

Additional standards should have been established to strengthen access protection in poor communities and rural areas and ensure that out-of-network care will be covered at no additional cost when in-network care is unavailable, said Blair Childs of Premier Inc. He's senior vice president of public affairs for the purchasing and quality improvement alliance in Charlotte, N.C.

The final rule provides some assurances on network adequacy, but every state can set its own rules, Childs said. "There is some clear direction, but we will need to watch carefully as the exchanges are established."

In the 1990s, plans limited expenses by narrowing networks, said Timothy Jost, a health law professor at Washington and Lee University in Lexington, Va. But consumers disliked restrictions on choosing out-of-network physicians, and networks became less restrictive as a result.

"We could see a move back to narrow networks," Jost said. "The final rule leaves discretion to the states to decide how narrow networks should be."

Organizations commenting in the fall of 2011 on the proposed version of the exchange rule suggested "that HHS establish a national, uniform standard" for network adequacy, the department said. HHS responded by changing the rule to state that qualified health plans' networks must maintain a sufficient number and type of health professionals, including those specializing in mental health and substance abuse "to assure that all services will be available without unreasonable delay."

In this area, the lack of more specificity is preferred, said Stephen Finan, senior director of policy at the American Cancer Society Cancer Action Network. Each state has variations in the types of networks needed to cover rural and urban areas. He said increased competition among insurers and networks exists, and every state market is different, so state flexibility makes sense.

The American Medical Association had provided HHS with comments on the proposed exchange rule in October 2011. "Exchanges should consider providing patients with more information on a [qualified health plan's] out-of-network parameters," the AMA wrote.

Although out-of-network care must be provided for emergency services, several organizations had urged HHS to codify additional standards on offering out-of-network care at no additional cost when in-network care is unavailable. Some suggested alternative standards on what is considered unavailable, such as care that is more than 60 minutes or 60 miles away.

The department responded by reiterating that services must be available without unreasonable delay. But HHS did not elaborate, because it said more specific rules might not be compatible with state regulations.

States in the driver's seat

Giving states leeway to steer their own exchanges was a key theme in the final rule. Health industry representatives praised HHS for relying on states to design insurance marketplaces that fit in with consumer insurance markets.

"This rule recognizes that states are in the best position to establish exchanges, because they have the experience and local-market knowledge needed to best meet consumers' needs," said Karen Ignagni, president and CEO of America's Health Insurance Plans. "States need to be given flexibility to ensure that individuals, families and small businesses have access to options that work best for them."

HHS has awarded 49 states and the District of Columbia a total of $50 million for planning the development of websites that people can use to review insurance policies and purchase coverage. An additional $667 million in grants have been awarded to 33 states to build the infrastructure of the exchanges.

"These new marketplaces will offer Americans one-stop shopping for health insurance, where insurers will compete for your business," HHS Secretary Kathleen Sebelius said. "More competition will drive down costs, and exchanges will give individuals and small businesses the same purchasing power big businesses have today."

But not every state has indicated that it will set up a public-private exchange. A number of states have turned away federal funds designed to help implement exchanges, while others, such as Oklahoma and South Carolina, have said they would try to create health insurance exchanges run by the private sector.

The federal government is creating an exchange for those living in states that don't have state-run exchanges available by 2014.

Final Medicaid expansion regulations

HHS followed the release of the final health exchange rule with a March 16 rule governing the expansion of Medicaid coverage to millions of additional low-income, nonelderly Americans.

"Today, too many uninsured Americans turn to the emergency room for care and can't pay their bills," said Marilyn Tavenner, acting administrator of the Centers for Medicare & Medicaid Services. "Insuring more Americans will decrease the hidden tax states and consumers with insurance pay to cover the cost of caring for the uninsured."

In 2014, individuals earning up to $14,856 a year, or a family of four earning up to $30,656, would be eligible for Medicaid. The federal government will provide 100% of the funding needed to cover the newly eligible beneficiaries for three years and then gradually reduce aid to 90% by 2020.

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ADDITIONAL INFORMATION

Reform law will cost less, cover fewer people

The Congressional Budget Office has updated its projections on the overall impact of the 2010 health system reform law after the first two years of implementation. CBO now says the law will cost $50 billion less than expected, but it also will cover about 2 million fewer Americans. The latest projections assume that:

  • 30 million uninsured Americans would obtain coverage by 2016, leaving up to 27 million residents without insurance.
  • Between 20 million and 23 million people will receive coverage on new health insurance exchanges.
  • Up to 17 million Americans will be enrolled in Medicaid and the Children's Health Insurance Program.
  • Up to 5 million fewer people will have coverage through employers.
  • About $1.1 trillion will be spent on insurance coverage provisions between 2012-2021.
  • About $1.5 trillion will be spent on gross additional costs for Medicaid, CHIP and tax credits for purchasing insurance.
  • About $400 billion will be received through penalty payments from people who don't obtain coverage, certain businesses that don't provide coverage for employees and an excise tax on high-premium insurance plans.

Source: Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act, Congressional Budget Office, March (link)

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