To hold down premiums, the insurer switched to policies with no out-of-network benefits.
Several weeks ago, thick envelopes from Anthem Blue Cross stuffed with 21 pages of text landed in the mailboxes of thousands of the company's California customers. The cover letter indicated right at the top that their premiums were going up, and advised that "if you're happy with your health plan, it's easy to keep it for 2017" — the only thing required was to pay the full premium on the bill for January.
At least as noteworthy was a change that wasn't explained until the packet's next page: the elimination of coverage for nonemergency healthcare services provided by out-of-network doctors, hospitals, clinics or laboratories. Under their current policies, these consumers have to pay about 40% of their out-of-network costs; under their new policies, they'll have to pay the entire bill unless it's for urgently needed treatment.
The change, which affects about half a million Californians, is an extreme example of a trend that's been driven by the relentless increase in medical expenses. To hold down premiums, insurers are using "narrow" networks with smaller rosters of providers. The idea is to make doctors and hospitals compete for access to the insurers' customers, forcing them to lower their fees while still hitting quality targets.
On the plus side, narrow networks give providers a badly needed incentive to treat patients efficiently. On the minus side, they limit consumer choice — although the networks must still be broad and deep enough to meet state requirements. And the pressure to cut fees could lead the healthcare system on a race to the bottom in terms of quality if regulators aren't vigilant.
Consumers shopping for individual policies (that is, people not covered by large group plans at work) have been voting for narrower networks with their wallets, strongly favoring policies with lower premiums over those with larger rosters of in-network doctors. Anthem's change would push most of its California customers with individual policies a significant step further. Their current plan, called a "preferred provider organization," enables them to see doctors outside the network for a modestly higher cost. Next year's version, called an "exclusive provider organization," makes out-of-network services far costlier.
This change has drawn a class-action lawsuit from Consumer Watchdog, a Santa Monica-based advocacy group. The lawsuit argues that federal Affordable Care Act regulations prohibit insurers from automatically renewing customers if their policies undergo a major change. Anthem should have notified customers 90 days before the end of the year that it was canceling their policies, rather than seeking to enroll them automatically in new, less generous ones, the lawsuit contends.
Consumer Watchdog wants the courts to require Anthem to continue offering its current out-of-network benefits; in response, Anthem insists that it fully complied with federal rules. Regardless of who's right, the magnitude of the change Anthem is making isn't as clear as it should be in the dense information packet it sent. That's bad for the customers who still rely on the services of out-of-network specialists — perhaps because they have a longstanding relationship with those doctors, or because they believe the quality of care is better.
In Anthem's defense, the change in benefits and the notice it sent were approved by Covered California, the agency that runs the state's marketplace for individual health policies. The shift averted an even larger increase in insurance premiums. And allowing Anthem to automatically renew customers could prevent those who don't sign up for a different policy from going uninsured.
It's hard to argue with Covered California's goals — holding down premiums for the comprehensive coverage required by the ACA and keeping people insured. And state law offers an added bit of protection, requiring insurers to charge in-network rates when policyholders have to go out-of-network to obtain the treatment they need.
Nevertheless, Anthem's customers should not be misled about the difference between next year's policies and this year's. Open enrollment for 2017 coverage, which began Nov. 1, extends through Jan. 31. Other insurers in their regions offer preferred provider plans, and if out-of-network services are important to them, they should explore those options.