The regulators who oversee the Affordable Care Act public exchange system are wondering whether to treat “non-network plans” as major medical insurance coverage and let the plans use ACA premium tax credit subsidies.
The Centers for Medicare & Medicaid Services—the arm of the U.S. Department of Health and Human Services that oversees HealthCare.gov and the state-based ACA exchange public exchange programs, such as Covered California and Connect for Health Colorado—has included a non-network plan proposal in the draft rules for 2027 coverage.
The proposal could help the hospital indemnity insurance plans sold by companies like Sidecar and Imagine360 compete directly with “managed care” plans, or plans that have contracts with healthcare providers, for ACA exchange users’ business.
If plan goes ahead, there may be more non-network plans for workers
If implemented, the proposal could have a direct effect on the fully insured small-group health insurance market in at least some states, and it could have an indirect effect on all employer plans, by making employers, benefits advisors and workers more comfortable with the use of non-network plans.
The backdrop: Up until the 1960s, most commercial health insurance policies were indemnity health insurance policies.
Traditional indemnity policies pay for specific types of care when patients meet the requirements spelled out in the policy. In many cases, the patients must pay for care up front and seek reimbursement from the insurers.
Patients tended to pay for routine care out of their own pockets. When they needed more expensive care, they looked for providers who were willing to take their insurance. Patients often learned at the providers’ offices whether the providers would take the patients’ insurance and how the providers would handle gaps between the providers’ billed charges and what the insurance companies were willing to pay.
In the 1970s, organizers of health maintenance organization plans and preferred provider organizations developed provider networks to support efforts to encourage primary care doctors to take responsibility for patients’ wellness, not simply to treat patients who already had serious health problems.
The contracts set quality standards and standard rates for various types of services. In some cases, providers received financial incentives for holding down use of specialty care and hospital care.
HMO plans tended to require patients to use in-network providers in most situations, and PPO plans gave patients incentives to use in-network providers.
Today, most major medical insurance policies offer network-based coverage.
The plans without provider networks have been some self-insured employer plans and union plans, and plans that fall outside the scope of the ACA major medical insurance definition, such as short-term health insurance plans, critical illness insurance, hospital indemnity insurance and travel health insurance.
A return to indemnity plans?
Today, some insurers are using mobile phone apps and indemnity insurance structures to offer new types of health coverage.
In some cases, insurers have sold non-ACA indemnity insurance policies that reimburse the insureds when the insureds receive care for one of the hundreds or thousands of conditions listed in the app from any provider who is willing to accept the insurance for full or partial payment for the care for those conditions.
Sidecar now wants to sell a non-network plan that would qualify as major medical coverage. The plan would cover the kinds of care that an ACA major medical insurance plan must cover. The patient could get the care from any provider willing to accept Sidecar’s reimbursement rate.
The debate: Critics of the non-network plan proposal, including many patient advocacy, provider and insurer groups, such as a coalition that includes both America’s Health Insurance Plans and the Federation of American Hospitals, question whether the enrollees in the plans would really have adequate access to providers and enough insurance coverage to pay their providers’ bills.
“Without robust, plain-language disclosures—and even with them—many consumers risk enrolling in plans that expose them to significantly higher out-of-pocket costs than they anticipate. Because non-network plans do not contract with providers, consumers would be vulnerable to balance billing,” the insurer-hospital coalition writes in a comment on the proposal.
Consultants at Wakely, an actuarial consulting firm, have suggested that the plans would be difficult to manage and difficult for providers to work with.
If the plans use low introductory rates to capture market share, they could hurt traditional health plans for a short period of time, then go broke, the consultants warned.
Fourteen Democratic senators have written to oppose the proposal, saying that the non-network plans would provide “junk coverage” and undermine better health coverage programs.
Sidecar contends that regulators could overcome many of the objections by requiring a non-network plan to set reimbursement rates at the market median.
“We support the requirement that non-network plans set allowable amounts (referred to in our model as benefit amounts) that are sufficient to enable enrollees to access a range of providers who will accept the benefit amount as payment in full,” Natalie Leino, Sidecar’s general counsel, writes in the company’s comment letter.
If 50% of providers took a patient’s coverage, the patient might be better off with a network-based plan with a narrow network, because Sidecar’s review of ACA plans in its state, Ohio, shows that some offer access to only 23% of the providers in a market, Leino writes.
Providers who work with a plan like Sidecar’s might like it, because “it allows them to treat patients as they see fit, without the administrative burdens that characterize traditional network-based coverage,” Leino writes. “Providers are not required to seek prior authorization for services, navigate step therapy protocols or contend with formulary restrictions.”
A company like Sidecar can also arrange to pay the provider the full amount promised at the time and point of service, and that can ease many of the collections problems providers face, Leino adds.
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