Can a Tiered Insurance Approach Save Obamacare?

By Michael L. Diamond

Oct. 19--NEW BRUNSWICK -- The two remaining health insurance companies on New Jersey's Obamacare exchange are rapidly signing up consumers to new plans that charges them less if they visit a health care provider in their top network, insurance executives said.

The so-called tiered plans have found an audience despite fierce opposition from hospitals left out of the network and lawmakers worried about their economic impact on big employers in their districts. But insurance industry officials said New Jersey consumers no longer can afford some of the nation's highest health care costs.

"A tiered product is something the marketplace was looking for and something the marketplace has accepted," said Ken Kobylowski, a vice president for AmeriHealth New Jersey and former commissioner of the New Jersey Department of Banking and Insurance. "It gives people different choices when they make decisions about how they will provide for their health care."

Kobylowski was among the health care experts who spoke to industry officials and policymakers Tuesday about tiered networks at the Rutgers Center for State Health Policy.

They focused on what could be an antidote for the Patient Protection and Affordable Care Act's marketplace for consumers not covered by Medicare, Medicaid or their employer. The marketplace has been stung by insurers either dropping out or asking for double-digit hikes in premiums to keep up with the cost.

New Jersey hasn't been immune. Health Republic Insurance of New Jersey, Oscar and UnitedHealthcare won't sell policies on the Obamacare exchange for 2017. But the two remaining insurers, Horizon Blue Cross Blue Shield of New Jersey and AmeriHealth New Jersey, have found a market through tiered insurance plans, executives said.

Consumers are getting ready to wade through the process again. Open enrollment for Obamacare begins Nov. 1.

Five takeaways from the conference:

1. Tiered plans aren't sweeping the nation.

Providers are split into Tier 1 and Tier 2. Consumers can see any that they wish, but they pay less out of pocket for providers that are considered Tier 1. In Monmouth and Ocean counties, hospitals owned by Hackensack Meridian Health and RWJBarnabas Health are in Tier 1. CentraState Medical Center in Freehold Township is in Tier 2.

Unlike an HMO, consumers don't need a referral to see a specialist. But it is a bid by insurers to lower the cost of health care by narrowing the network of providers consumers can see. Studies have found that narrow-network plans are 6.7 percent cheaper, said Katherine Hempstead, senior adviser for the Robert Wood Johnson Foundation, a Plainsboro-based health-care philanthropy, said.

Still, only 15.5 percent of Obamacare insurance plans are considered tiered networks, Hempstead said.

"It's not a common thing," she said. "An awful lot are in New Jersey."

2. In New Jersey, consumers are snapping them up.

Horizon has said it enrolled 189,000 individuals, including 41,258 who previously didn't have insurance, for its tiered plan called Omnia, making it the state's most widely held insurance plan for 2016. AmeriHealth's enrollment has increased from 10,000 to 70,000 since 2013, with half of its consumers purchasing a tiered plan, Kobylowski said.

The reason isn't complicated. New Jersey insurance premiums are 25 percent higher than the national average. And they were growing 25 percent faster than the nation since 2010, said Kevin Conlin, Horizon's executive vice president and chief operating officer.

Horizon requested a premium increase for 2017 of less than 5 percent for its Omnia plan, far lower than its counterparts both in New Jersey and nationwide.

"We heard form the marketplace that was an unsustainable number, that's an unsustainable growth rate," Conlin said. "They would be open to other products."

3. If it's so great, why did lawmakers in Trenton fight it?

When AmeriHealth New Jersey introduced its tiered network in for 2014, it barely registered. When Horizon introduced Omnia last year, it sparked lawsuits and legislative hearings.

It shouldn't have been a surprise. Horizon covers 60 percent of the individual market, compared with AmeriHealth's 21 percent market share, according to state figures. If it funneled patients to specific health care providers, it could have a sizable financial impact.

CentraState and five other hospitals have sued in part because consumers might think Tier 2 might be lower quality. But it raises a question of whether there is room for everyone.

"I'm not trying to be a cold-hearted capitalist," Assemblyman Jack Ciatterelli, R-Somerset, said during the conference. "There are going to be winners and losers. That's a reality we're going to have to deal with in this health care space as we seek a perfect delivery system."

4. The tiered network isn't as innovative as it sounds.

The health-care system is making a transition from rewardinghospitals and doctors for the services they provide to rewarding them for the quality of care. The tiered network, however, still is a fee-for-service model. Health-care providers agree to take less in reimbursement in exchange for more patients, said Michael Maron, president and chief executive officer of Holy Name Medical Center, a Teaneck-based hospital that is in Horizon's Tier 2.

It is a bit tone deaf, he said. In the not-so-distant future, consumers will be more engaged in their own health care and providers will be rewarded based on the quality of their care.

"All (a tiered network) is is a tool to shift volume from Provider A to Provider B," Maron said. "There's no magic to it."

5. There might be a little magic to it.

The fee-for-service model might be on the way out. But Omnia also features a partnership between Horizon and RWJBarnabas, allowing them to share data that can help them better manage patient care. It is an example of insurers and health care providers collaborating more closely, officials said.

As health care moves forward, it is increasingly apparent that the best way to avoid an expensive bill is to not get sick.

"It is a transition, but we're moving in the right direction," said Patrick Young, president of population health for Hackensack Meridian Health.

Copyright 2016 - Asbury Park Press, N.J.