Tiered Health-Insurance Networks: Learning Lessons from Other States

Can some of the turmoil that’s greeted Horizon’s OMNIA be eased by reviewing how tiered networks have worked in other parts of the country?

healthcare blood pressure
The skirmishes over New Jersey’s new low-cost health insurance plan continue to gain intensity, with lawmakers staking out opposing positions and urban hospitals and Horizon Blue Cross Blue Shield — the creator of OMNIA — squaring off in court and through the press.

The drama also has prompted some healthcare policy experts to prescribe a review of other states’ experience with these so-called tiered plans, which provide customers greater savings in exchange for some limits on provider choice. They point to lessons learned in Georgia, Massachusetts, and North Carolina as lessons learned for Garden State officials now wrestling with questions about OMNIA’s impact on patients and providers and the role regulators should play going forward, as these less-costly plans become more prevalent.

These issues are hardly unique to the Garden State, according to Ray Castro, a healthcare expert with the liberal think tank New Jersey Policy Perspective. “It certainly is becoming a national issue,” Castro said. “In some ways other states are ahead of us in identifying the problems, although maybe they don’t have a solution.”

With healthcare costs continuing to rise nationwide, a growing number of business and individuals are turning to tiered insurance plans, which can save customers thousands of dollars a year and, potentially, keep them healthier. To hold premiums down, insurance companies strike a deal for lower reimbursement rates with certain providers who commit to key wellness metrics. In return, these doctors and hospitals are guaranteed a greater volume of patients. With OMNIA, patients can visit any providers in the Horizon network, but they save more on copays, co-insurance, and other out-of-pocket costs when they visit a provider in Tier 1.

Customer interest

In New Jersey, healthcare providers, insurance executives, elected leaders, and many constituents generally agree tiered plans are a critical option in order to keep healthcare costs down, and OMNIA appears to be popular with consumers. More than 234,000 people signed up in December and January, including 41,000-plus who did not have insurance before — possibly because it was previously unaffordable. These people included a high percentage of Hispanics, African-Americans, and Asians, which drew praise from a number of business and healthcare organizations.

“Helping people move from the uninsured rolls and connecting them to affordable high-quality health coverage that makes wellness a priority is the first step toward a healthier life and a healthier New Jersey,” said Robert A. Marino, Horizon’s chairman and CEO. Affordable plans have been hard to find and, he said, and “too often … trade cost for quality.”

But controversy has swirled around the process that Horizon, the state’s largest insurer with 3.8 million customers, used to assess providers and establish the tiers, and a number of observers are concerned about the plan’s impact on the larger healthcare landscape. A number of urban safety-net hospitals relegated to Tier 2 have said the product’s design will confuse patients and could undermine their already shaky finances, as OMNIA patients migrate to Tier 1 hospitals in search of greater savings. The group, which includes most of the state’s Catholic hospitals, adds that Horizon never gave them a chance to compete for Tier 1 status.

The debate has played out in billboards, protests, court challenges, and press conferences, almost since the plan was announced in September. Two weeks ago state Senate President Stephen Sweeney (D-Gloucester) stepped in to defend Horizon’s effort to meet customer’s needs, putting him at odds with a number of Democratic colleagues concerned that OMNIA will harm their largely urban communities. Sweeney, who led efforts in recent years to bring down healthcare costs for state workers, requested financial data from all acute-care hospitals and insurance providers and asked the Medical Society of New Jersey, which represents thousands of doctors, to commit to reforms that will lower healthcare costs for all.

Beyond the Garden State

Castro, with NJPP, said several states have turned to model legislation created by the National Association of Insurance Commissioners, which was updated in 2013 in response to the creation of tiered products and other changes in the marketplace. Among other things, Castro said it provides a blueprint for regulations that encourage insurance companies to use a clear, publically available process to evaluate providers and build any tiered networks — and that these products are fully understood by consumers.

“There’s a growing consensus — even in New Jersey — that there has to be more transparency and more specificity in terms of the standards being used,” he said.

The model law requires insurance companies to include nationally accredited quality metrics as part of the process of establishing tiers and to make public the analysis and metrics involved. It also addresses network adequacy, requiring that each tier include diverse providers with locations and hours of operation that truly accommodate patients. In addition, the model law bans criteria that discriminate against high-risk patients or the doctors and hospitals who treat large numbers of these individuals — something Castro said could be useful as New Jersey considers additional regulations.

Blue Cross Blue Shield North Carolina rolled out a tiered plan called Blue Select in 2013 that has caught the attention of Mike Maron, president and CEO of Teaneck’s Holy Name Medical Center, a leader in the anti-OMNIA crusade. The BCBSNC website lists the quality measures, adopted from nationally recognized rankings, that the company uses to assess providers and includes links with detailed information on the tiering methodology for each year. This type of disclosure gives patients more information about the quality of their providers and allows all providers a chance to compete on the same standards for eligibility in the top group, Maron said in a recent NJ Spotlight webinar. There is also an appeals process for providers who feel they have been incorrectly assigned to a tier.

According to the overview, “Transparent methodology provides physicians with access to information on how their performance compares to their peers on nationally accepted quality measures as well as local cost efficiency benchmarks.” BCBSNC covers some 3.9 million people; North Carolina has a population of roughly 10 million, while New Jersey has just shy of 9 million residents.

In Massachusetts, regulatory changes in 2010 made the market more receptive to tiered plans and several insurance companies followed through with low-cost products. A recent state study found several companies that offer tiered products, but Blue Cross Blue Shield Massachusetts covers the vast majority of these customers.

Linda J. Schwimmer, president and CEO of the New Jersey Health Care Quality Institute, praised this Blue Options plan for its reliance on national quality measures and its customer-friendly language in her NJ Spotlight Webinar presentation. BCBS Massachusetts includes much of this information on its website and claims to work with providers to ensure the tier rankings reflect new data each year. A search tool for customers makes it easy to see which facilities are included in each tier and how they compare on cost and quality metrics.

“It’s important that if we’re going to say a product is high quality that we define what that is in a way that is based on public evidence and national standards,” Schwimmer said, as opposed to a product that is primarily “high-value or cost-effective” but involves less quality control. She pointed to the Leapfrog Group, National Quality Forum, and National Committee for Quality Assessment as examples of well-respected, publicly vetted healthcare ratings organizations.

Georgia is also set to adopt a law that would further regulate tiered insurance plans in that state, NJPP’s Castro noted. As drafted, the measure calls for insurers to provide a “description of the criteria” it used to create the network — but does not require the use of specific national standards. The reform also requires insurance companies to provide clear, easily accessible, and up-to-date information about which doctors and hospitals are included in a specific tier.

Transparency and OMNIA

Horizon has vigorously defended the process it used to create the OMNIA plan and the state office of the attorney general issued a letter earlier this month stating the company broke no laws when it launched the new product. Lawmakers had asked the attorney general to review the plan’s original approval by the state Division of Banking and Insurance, last fall.

“Horizon has been more transparent than any insurer about the criteria we used to establish our tiered network and support [Sweeney’s] call for transparency in the criteria insurers use when creating tiers. We also support his call for legislation to require that insurance companies fully educate consumers about their cost-share obligations. Consumers need transparency in healthcare in order to make informed choices,” company spokesman Tom Wilson said last week.

But a number of New Jersey lawmakers have raised concerns about OMNIA’s rollout and what the trend toward tiered products will bring. Senators Joseph Vitale (D-Middlesex), Nia Gill (D-Essex), and a half-dozen members of the Assembly — most in urban districts — advanced a handful of reforms earlier this month, before the legislature turned to focus on Gov. Chris Christie’s new budget proposal.

Among other things, these measures require insurance companies to make public both their process for assigning providers to tiers — including the nationally recognized guidelines and weighting mechanisms involved — and the calculations they use to determine consumer costs. Another bill aims to ensure each tier on its own meets the state’s network-adequacy requirements for the number of doctors and the type of specialists available to patients.

“The seminal question is are we going to create a base set of rules that include transparency, national endorsed rules … and then after that point let the health plans decide how they want to design their products,” Schwimmer, with the Quality Institute, asked in her presentation. “Or do we want to take the path forward of establishing a more prescriptive set of rules that will dictate how the market will work.”