The new health insurance online marketplaces (the "exchanges"), a cornerstone of the Affordable Care act, open for business October 1, 2013. Beginning on that date, individuals and small businesses will be able to log on to the exchanges, review and compare the plans offered, and enroll in plans of their choice. If you are a provider of healthcare services, you can expect patients who have enrolled in plans through the exchanges to begin presenting their new insurance cards as of January 1, 2014.
If you have not done so already, now is a good time for you to review your managed care contracts and to ensure that you have a plan in place for getting paid for treating these new enrollees. Have you already contracted to participate in new insurance plans that will be offered through the exchanges? Will the new plans be covered under your existing contracts with managed care payors? Below are some basic steps for evaluating your "exchange readiness" from a contractual standpoint.
- Determine which insurers are participating in your state (or states).
Over the past few months, states have begun releasing provisional lists of participating insurers. For states with federally-facilitated exchanges or state partnership exchanges (34 states fall into one of these two categories), CMS plans to release the final list of participating insurers in mid-September 2013, and finalize contracts with the selected insurers shortly thereafter.1
In each state, there are two types of exchanges: the individual exchange, which offers coverage to individuals; and the small business exchange, which allows employers to purchase small group coverage for employees.2 Insurers may participate in either, neither, or both for each state. The insurance products offered through the exchanges must meet certain requirements established for "qualified health plans," but there will be different levels of coverage offered, and insurers may offer one product or a number of products on any exchange in which they participate. In addition, some states have approved plans that cover a geographic area smaller than the entire state (e.g., county-wide plans).
For the most part, the participating insurers are familiar players, and providers likely will find that they currently have contracts with some or all of them. The participating insurers are split across two main categories: insurers currently active in the individual or small group markets in the state; and insurers currently operating Medicaid managed care plans. The number of insurers ultimately offering products on each exchange likely will vary widely from state-to-state.
- Review your current payor contracts to determine if the new exchange plans are already covered.
Once you have identified the participating insurers in your state, review the terms of any current contracts you might have with those insurers. Consider whether the contracts, by their current terms, would cover the new exchange products without further amendment. For example, a contract to participate in all PPO products offered by an insurer likely would be considered by the insurer to encompass a PPO product the insurer intends to offer through the exchanges. On the other hand, a contract that includes an attachment identifying all products in which the provider is participating likely would require amendment to cover the new exchange product.
If the existing contract with a participating insurer does not appear to cover any new plans offered through the exchanges, determine what amendment would be required to make the existing contract cover the new product. Insurers often revise the list of participating products through "opt-out" notice, where they issue an amendment that automatically will take effect unless the provider objects within a certain amount of time.
- If you do not have contracts with the participating insurers in your state, consider whether you are potentially vulnerable to a "silent PPO."
The term "silent PPO" typically is used to describe a situation in which, unbeknownst to the provider, it finds that it is part of a PPO network administered by a company it has never heard of, which is now demanding negotiated discounted rates. This situation usually arises because a provider has agreed in a payor contract to allow that payor to sell access to the discounted rates negotiated with the provider. Often such access is sold to self-employed insurers or other small entities with less leverage to negotiate favorable rates.
Because insurers offering exchange products must meet network adequacy standards, it is possible that they could resort to silent PPOs to ensure they have an adequate network in place in January or to fill any holes that might arise if enrollment exceeds expectations.
- Develop a contracting strategy.
As with all managed care contracting, the appropriate strategy will differ from provider to provider. Here are some questions to consider in developing a comprehensive strategy to tackle participation in plans offered through the new exchanges:
Would you like new exchange plans to be covered under your existing contracts, or would you prefer to negotiate new agreements or addendums?
Having determined whether your existing contracts cover the new exchange products offered in your state, the next step is to determine whether, in an ideal world, you would like those contracts to cover the new plan. In other words, figure out whether you like your current contract enough that you want its rates and other terms extended to new products. As a practical matter, you may not have a choice in this respect if your current contract binds you to its terms for any new products offered by the payor.
For some insurers, such as those currently participating primarily in the Medicaid managed care market, you may not want any new products to be covered under your existing contracts.
For primarily commercial insurers, you may find the situation reversed—you may want to be paid at current commercial rates, but find that the insurer insists you negotiate separately to be included in the provider network for the new plans offered through the exchanges.
How crucial is the exchange population to your financial health?
The population eligible for and anticipated to enroll in exchanges varies widely from state-to-state depending on, among other factors, the current insurance market structure, whether the state agreed to expand Medicaid, and if the state is encouraging enrollment through outreach or advertising. These factors affect not the size of the population participating in the exchanges in your state, but also the characteristics of that population (e.g., exchange enrollees in states that chose not to expand Medicaid overall may be in lower income brackets than enrollees in states with more expansive Medicaid coverage).
Nationwide, the Congressional Budget Office ("CBO") estimates that 7 million individuals will enroll in exchanges in 2014, but the projected number grows rapidly: up to 13 million in 2015 and 24 million in 2017.3 In other words, in the next three years, the CBO estimates that close to half of the current population of uninsured individuals will be enrolled in an insurance plan through either an individual or small business insurance exchange.4 However, the percentage of uninsured likely to be covered in any particular state in the next few years will vary widely.
Consider how the exchanges are likely to impact your patient volume and patient mix—both good and bad. For providers that currently treat large numbers of uninsured patients, the effects are likely to be far more dramatic than for providers that treat primarily commercially insured patients.
Should you participate in "narrow networks"?
Due to cost pressures, many insurers planning to participate in the exchanges have announced that they intend to rely heavily on narrow networks, where the focus is negotiating deep discounts with a few providers, rather than offering a broad provider network.5 Although many of the narrow networks intended to be operational on January 1 are already mostly contracted, this is unlikely to be the last opportunity to participate in this type of high volume, low reimbursement model.
If you decide to participate in a narrow network, make sure you are not trading a steep discount for a vague, unenforceable promise about increased volume. Insist on firm expectations. At the same time, make sure that you consult legal counsel to ensure that the offering of discounts in such a context is legally compliant, e.g., if your payor is a federal healthcare program, you may want to fit within one of the anti-kickback safe harbors covering the offering of discounts to health plans.
Are you ready for an increased focus on quality measures and more provider "tiering"?
In the post-Affordable Care Act world, with the prohibition on preexisting condition limitations and the "mandatory issue" rule, insurers will have more of an incentive than ever to focus on keeping enrollees healthy and ensuring they receive quality, cost-effective care. Do not be surprised if insurers redouble their efforts to reward providers who post superior quality numbers and lower costs.
Such efforts may include the continued proliferation of alternative reimbursement models that include a quality component, such as capitation, ACOs, or quality bonuses. Providers may also notice an uptick in insurers’ efforts to drive or steer patients to providers believed to provide the best or most cost-effective care, practices which are enabled by the implementation of electronic medical records and the resulting increase in available data.
As companies collect and use more data, the possibilities expand for insurers interested in ranking or "tiering" providers. One way for insurers to use ranks or tiers is to simply publicize the collected data—along with the ranks or tiers—and encourage patients to choose providers based on the data. These efforts to increase "transparency" to consumers will lead to more information and ratings about providers finding their way online. Of course, once an insurer has divided a list of providers into tiers based on available data, it can offer more valuable incentives, such as discounted co-payments, to patients who choose to go to the top tier of providers. Faced with mounting cost pressures, insurers are increasingly likely to seek to use such variable cost-sharing to encourage patients to utilize a subset of their provider network considered to be the highest quality or lowest cost.
Over the past decade, some "tiering" models have been successfully challenged by providers—but don’t expect them to go away. Beware of rankings based on faulty data and consider whether your current contracts protect you from ending up in the wrong tier with no recourse.
What reimbursement rules apply to plans offered on the exchanges?
In general, state reimbursement rules will apply to insurers participating in the exchanges. In other words, if your state prohibits balance billing, then you cannot balance bill patients enrolled in a plan purchased through an exchange. Similarly, state protections for providers, such as prompt payment requirements, recoupment limitations, and similar practices will apply to the new plans.
The Affordable Care Act included one notable change in the reimbursement rules for out-of-network emergency services. All plans purchased through an exchange must cover out-of-network emergency services at a minimum payment rate, defined by CMS as the greatest of three options: (1) the in-network negotiated rate, (2) the out-of-network rate calculated using the same method the plan generally uses to determine out-of-network payments, or (3) the Medicare rate. Because insurers continue to frequently reimburse for out-of-network services based on "usual and customary" charges, providers can anticipate a new round of battles over the definition of this term. Importantly, as "grandfathered" plans—certain plans in existence on the date the Affordable Care Act became law—disappear, this minimum reimbursement requirement will become increasingly relevant, as it will apply to many plans beyond those offered on the exchanges.
Does your compliance plan cover new exchange plans?
Finally, in reviewing reimbursement arrangements—particularly novel or creative ones—providers should beware of potentially expanding compliance obligations. For example, certain federal subsidies paid to insurers offering exchange plans may operate to bring the plans within the ambit of the federal anti-kickback statute, and there also may be corollary state anti-kickback statutes to consider. The federal government has declined to take a firm position on the issue of whether exchange plans are in all cases subject to the federal anti-kickback statute, but providers should consider treating insurers offering exchange plans as they would insurers offering Medicare Advantage or Medicaid managed care.
With the insurance exchanges "going live" October 1, having a contracting strategy will be more important than ever for healthcare providers. All providers must be prepared to cope with new negotiation tactics and fresh challenges in the managed care space.