Insurer Cuts Doctor Pay After ACA Losses: Will Others Follow?
The move by insurer Highmark to reduce physician rates in health plans offered under the Affordable Care Act (ACA) to make up for massive losses has sparked anger, as well as worries that other insurers will follow suit.
Highmark, a Blue Cross and Blue Shield affiliate that operates in Pennsylvania, West Virginia, and Delaware, said it lost $221 million on its health plans in ACA marketplaces, or exchanges, in 2014, and that it expects to lose another $500 million in 2015 because enrollees have required more care than anticipated. That has caused the insurer to pay more in claims than it collected in premiums.
Last month, Highmark announced it would cut provider rates on average in Pennsylvania by 4.5%, effective April 1, to keep these plans viable, rather than shutting them down. Physicians in the insurer’s ACA networks in Delaware and West Virginia were spared the axe, at least for the time being.
Scott Shapiro, MD, president of the Pennsylvania Medical Society, is one physician who is not showing Highmark any sympathy regarding its financial situation.
“Frankly, it’s unbelievable that Highmark has so grossly mismanaged their book of business and made the unconscionable decision to rectify that wrong on the backs of physicians,” said Dr Shapiro in an interview with Medscape Medical News. “It stinks.”
His telephone has been ringing constantly with calls from his members, he said. “The level of anger starts at irate and goes up from there.”
Dr Shapiro and others said the coming pay cut could pressure some physicians to accept fewer enrollees in exchange plans or drop out of the provider networks entirely. “They may balance their willingness to be in the network with the need to cover their basic costs,” said Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association.
Reimbursement rates for providers contracting with ACA plans typically are not generous to begin with, Gilberg told Medscape Medical News. “They have been closer to Medicare than commercial, and sometimes between Medicaid and Medicare.”
“I don’t believe what ails the ACA exchanges is excess payment to doctors,” he said.
However, Highmark has been paying physicians in its ACA networks “at full commercial rates,” said company spokesperson Aaron Billger.
Lower Pay Better Than No Pay?
Highmark network physicians are galled not only by the 4.5% pay cut but also by a published report that hospitals would be spared any financial sacrifices. An article in The Patriot-News in Harrisburg, Pennsylvania, indirectly quoted Alexis Miller, Highmark’s senior vice president for individual and small group business, as saying that “doctor contracts are more flexible, and there’s ‘precedent’ for such adjustments, while cutting hospital reimbursements would require hospital-by-hospital negotiations.”
However, in an interview with Medscape Medical News, Billger said his company is indeed talking with hospitals and “addressing issues.” He noted that unlike physicians, hospitals are not paid according to a uniform fee schedule.
And what about a financial sacrifice on the part of Highmark? The Patriot-News indirectly quoted Miller as saying that “the market must be self-sustaining, and dipping into reserves isn’t a practical solution,” another statement that inflamed physicians. Billger told Medscape Medical News, however, that Highmark has used a substantial part of its reserves in the past to subsidize its money-losing exchange plans. But he agreed with Miller that continued reliance on company reserves isn’t “a sustainable business practice.”
“As a healthcare community, we’re at the point where we need to work collectively to ensure the viability of the ACA marketplaces,” Billger went on to say. He pointed out that ACA enrollees were once the kind of patients who came to physician offices unable to pay their bills. “We don’t believe going back to uncompensated care is good for Pennsylvania or physicians,” he said.
For the average physician, the 4.5% pay cut would reduce overall revenue by only 0.5%, given that ACA enrollees constitute just a portion of his or her patient roster, said Billger. He also noted that before the ACA, Highmark had offered a low-cost, limited-benefit plan called SpecialCare with provider rates that were 27.5% lower than going commercial rates, and that physicians had accepted them. The 4.5% cut planned for April will be far less painful to swallow, he said.
Highmark Known for Aggressive Dealings With Physicians
Highmark is not the only major insurer to take a beating in the ACA exchanges. UnitedHealth Group reported a $720 million loss in this line of business in 2015. The giant insurer has warned that it may pull out of the exchanges in 2017 if profitability is not in sight. Other insurers such as Aetna and Anthem also lost money on the exchanges last year, but they claim to see signs of an upswing in 2016.
For all these insurers, the red ink results from a risk pool of beneficiaries that is riskier than first anticipated. Total enrollment fell short of initial projections, and enrollees are more chronically ill than expected, driving up healthcare costs. Highmark said that the rate of congestive heart failure among its ACA members, for example, is 43% higher than that for members of its regular commercial plans. The rate of chemotherapy claims per ACA member is 49% higher. Spokesperson Aaron Billger explained that many individuals who signed up for coverage previously had been either uninsured or underinsured, which translated into unmet medical needs.
The financial pain of insurers might not be as acute if the ACA worked as originally designed. Foreseeing that insurers may initially struggle to make a profit on exchange plans, the ACA’s drafters pencilled in “risk corridor” subsidies to offset any losses for the first 3 years. However, a Republican Congress has limited the ability of the Obama administration to dispense most of those funds. As a result, insurers will get only about 13% of the subsidy money they counted on, which was about $220 million for Highmark in 2014. And the insurer has yet to receive any of that federal aid.
Spot checks with the American Medical Association, the Medical Group Management Association, and other medical associations did not turn up insurers other than Highmark that have cut physician pay in response to losses on the ACA exchanges. Then again, Highmark is a pacesetter in its field, according to Ron Howrigon, a medical practice consultant who helps physicians negotiate contracts with insurers.
“Highmark is almost always at the forefront of these trends,” said Howrigon, president and chief executive officer of Fulcrum Strategies in Raleigh, North Carolina, noting that the insurer has a reputation for dealing very aggressively with physicians. “It’s not surprising that they’re first out of the chute. If this is like everything else, others will follow suit.”
Elizabeth Carpenter, who heads the healthcare reform unit of the consulting firm Avalere Health, also sees the possibility of rate reductions for physicians serving exchange plan patients.
“When carriers feel pressure,” Carpenter told Medscape Medical News, “it’s expected that providers may feel increasing pressure, too.”
Filed under: General Problems
Oddly, I had a conversation about this last year, on a flight to Austin. My seatmate was an ex-Army intelligence officer whose civilian job was maintaining medical X-ray equipment. He gave a very detailed rundown of how payments for diagnostic X-rays were being slashed, in a systematic way, to make sure that X-ray machines would break down and their owners would not be able to get paid for the spare parts the machines needed. The plan as he understood it, was to delay the biggest problems until after the 2016 election. It will be at that point, when equipment starts failing and cannot be fixed without new capital to buy parts, that nonprofit hospitals will be severely squeezed.
Michigan, like some other states, allows no interest charges on patient debts to healthcare providers. So, if a hospital is owed money in perpetuity, it can’t borrow from a bank, to buy the spare parts it needs.
What will probably come out of this, is an offer to nonprofits: Become part of some federal health service, and the Government will relieve you of your obligations.
Taking hospitals and clinicians entirely out of the reach of civil litigation for malpractice, is the kind of Faustian bargain that could actually delay the insolvency of the Social Security Trust Fund by several years.
Crimes always involve motive and opportunity.
We’ve identified both motive. And opportunity.
Great time to vote EVERY incumbent politician out of office.