Blog

Merry Christmas to all!

Merry Christmas to all!

We hope you have a restful and refreshing time with friends and family.

It is generally easy to know the price of a health insurance plan (the premium), but how does one measure the quality of one? There are many dimensions to rate a plan one. For example, if a health insurer is notorious for denying claims, patients might be less likely to enroll with its plans. Another dimension is whether the insurance plan is accepted by a wide range of physicians. A insurance plan might not be popular with physician if it offers reimbursement rates that are too low or if it incurs too much hassle before paying claims. Inversely, health insurance plans can grow their networks by offering higher reimbursement rates, which unfortunately, generally causes the plans to be more expensive. As KFF Health News reports, the current administration is proposing to articulate specific network adequacy standards (for example, quantifying the lower bound on how many physicians of each particular specialty need to be available within patient populations).

It is generally easy to know the price of a health insurance plan (the premium), but how does one measure the quality of one? There are many dimensions to rate a plan one. For example, if a health insurer is notorious for denying claims, patients might be less likely to enroll with its plans. Another dimension is whether the insurance plan is accepted by a wide range of physicians. A insurance plan might not be popular with physician if it offers reimbursement rates that are too low or if it incurs too much hassle before paying claims. Inversely, health insurance plans can grow their networks by offering higher reimbursement rates, which unfortunately, generally causes the plans to be more expensive. As KFF Health News reports, the current administration is proposing to articulate specific network adequacy standards (for example, quantifying the lower bound on how many physicians of each particular specialty need to be available within patient populations).

When the Affordable Care Act passed, the legislation mandated the coverage of various conditions so that patients could more easily compare plans. Regulation around minimum network adequacy standards will help ensure that health insurance plans will be more useful to patients -- after all, what good is insurance if the patient cannot use it for lack of physician availability? Setting these standards can be difficult, but are likely to involve the number of physicians in an area that are in network relative to the number of patients in that area, with different ratios for different physician specialties. One component of the standards also seems to test how long a patient must travel in order to see a provider. Beyond the complexity of calculating network adequacy, these standards will also likely cause some plans to be more expensive, just as mandating a minimum level of coverage increased the price of health plans.

Patients who are 65 years old and older qualify for Medicare health insurance. Seniors can opt for Medicare Advantage plans, which, unlike traditional Medicare plans, are administered by private companies (e.g. health insurance carriers). These Medicare Advantage plans can offer various benefits that traditional Medicare plans do not, attracting a number of patients. KFF notes that enrollment in Medicare Advantage plans (as a percentage of total eligible Medicare patients) has grown from 19% in 2007 to 51% in 2023. However, KFF Health News recently reported that an increasing number of provider groups have been refusing to accept some Medicare Advantage plans, citing low reimbursement rates and increased hassles in getting paid.

Patients who are 65 years old and older qualify for Medicare health insurance. Seniors can opt for Medicare Advantage plans, which, unlike traditional Medicare plans, are administered by private companies (e.g. health insurance carriers). These Medicare Advantage plans can offer various benefits that traditional Medicare plans do not, attracting a number of patients. KFF notes that enrollment in Medicare Advantage plans (as a percentage of total eligible Medicare patients) has grown from 19% in 2007 to 51% in 2023. However, KFF Health News recently reported that an increasing number of provider groups have been refusing to accept some Medicare Advantage plans, citing low reimbursement rates and increased hassles in getting paid.

Without safeguards in place, healthcare costs can rise quickly, resulting in higher insurance premiums. Offering lower reimbursements can help reduce the growth in premiums, but providers are less happy about receiving less compensation. Similarly, practices such as requiring prior authorizations can also curb healthcare spending, but do so at the expense of imposing administrative burdens on providers. Apparently, some plans have push far enough in these dimensions that some provider groups are outright refusing to accept some Medicare Advantage plans.

Interestingly, the article cited a study that showed that "13% of the denied requests for treatment it reviewed and 18% of denied claims were for care that should have been covered." The article also noted that "Studies show that Medicare Advantage costs taxpayers more per beneficiary than the traditional program." While many patients are happier with Medicare Advantage plans, it is unclear whether the government ends up better by offering that option. Given recent refusals by some provider groups to participate, it is also unclear whether Medicare Advantage plans will continue their growth in popularity.

In some welcomed news, FTC is suing a private equity firm for its acquisitions of anesthesiology practices to dominate a market. Known as a "roll-up," a larger firm or practice acquires smaller competitors to gain market share. In this case, although the size of each individual acquisition was below the reporting threshold, the outcome is that the firm now controls 60% of the anesthesiology market in Texas and is therefore able to exert outsized influence on pricing.

In some welcomed news, FTC is suing a private equity firm for its acquisitions of anesthesiology practices to dominate a market. Known as a "roll-up," a larger firm or practice acquires smaller competitors to gain market share. In this case, although the size of each individual acquisition was below the reporting threshold, the outcome is that the firm now controls 60% of the anesthesiology market in Texas and is therefore able to exert outsized influence on pricing.

The firm responded that its rates "have not exceeded the rate of medical cost inflation for close to 10 years," but it seems that a firm having that type of market share is an issue, particularly if it grew primarily by acquisition. The increased market share tends to result in increased rates (whether early on or later), which in turn get passed along to insurers, employers, and ultimately, patients. Although firms like the one in question may tout the benefits of scale, having many smaller competitors fosters greater competition (known in economics as a "perfect market" when no one firm is able to change the price), which tends to result in better outcomes for consumers.

From the team at DocSpot: Happy Thanksgiving!

From the team at DocSpot: Happy Thanksgiving!