With two new HMO plans introduced last week on the federal insurance exchange, Independence Blue Cross is offering consumers a road map to cut out-of-pocket health-care costs.
The trick for consumers who sign up for Blue Cross’ HMO Proactive plans is to choose hospitals, primary-care physicians, and specialists in the least expensive of IBC’s three price tiers of health-care providers.
IBC officials emphasized that tier one, the cheapest, is not a limited or narrow network because customers have access to the entire network; they just have to pay more if they choose a provider — a doctor or a hospital — in tier two or three.
Access to a certain specialist, for example, could drive that choice.
The difference to the consumer is significant.
In IBC’s HMO Proactive Silver plan, a consumer’s out-of-pocket costs for outpatient surgery are $200 in tier one, with no deductible. The same surgery costs the patient $700 in tier two plus deductible, or $1,250 plus with deductible in tier three.
Tier one includes 50 percent of hospitals, 40 percent of primary-care physicians, and 40 percent of specialists in IBC’s network, officials at the Center City insurer said.
IBC is offering 11 other plans on the government-mandated insurance exchange that opened Tuesday, but the tiered plans include a component that has been missing from the market, said Doug Chaet, IBC’s senior vice president of contracting and provider networks.
Historically, it has made no difference to the insured patient if the provider’s price is $1,000 or $10,000, because insurance paid it, Chaet said.
“Now with products like this, you’ve injected greater price sensitivity to the consumer,” he said. “It gives them a reason to care about things. They can determine on their own how much they care.”
The consumer’s risk is limited by the Affordable Care Act’s $6,350 limit on annual out-of-pocket costs for an individual. For a family the limit is $12,700.
New Jersey’s biggest health insurer, Horizon Blue Cross Blue Shield of New Jersey, also has tiered options that allow consumers to reduce out-of-pocket costs. It has six tier-one hospitals in Burlington, Camden, and Gloucester Counties.
AmeriHealth New Jersey did not provide details on its tiers because it is still notifying hospitals.
Hospital officials worry that consumers might not understand price-based tiers.
“High cost can be attributed to a lot of different factors,” said Curt Schroder, regional executive of the Delaware Valley Healthcare Council. “Academic medical centers that have a teaching mission and a research mission will have higher costs. Hospitals that have burn centers, trauma centers, different specializations like that could also have higher costs.”
IBC divided hospitals into tiers based on prices in existing contracts and gave hospitals the chance to negotiate lower prices to get into a lower tier.
Jefferson Health System, for example, landed in tier three for 2014, but that is not necessarily permanent, said David F. Simon, executive vice president of Jefferson. “Our participation in a tier-two or tier-three mode in that product in the future is going to be a matter for discussion when we next negotiate with IBC,” he said.
Abington Memorial Hospital, whose current IBC contract put it in tier three, agreed to tier-one prices for people in the HMO Proactive plans, Abington’s chief financial officer Michael Walsh said.
Abington’s large maternity business, which delivers nearly 5,000 babies a year, was a key factor in the decision. “For a mom delivering a baby, the difference between being tier one and tier three is significant. It’s thousands of dollars,” Walsh said.
Walsh would not say how much Abington cut prices. “It’s enough that if I had to do that for 100 percent of the patients it would cause significant hardship to this institution,” he said.
Pennsylvania Hospital in Center City, another top maternity hospital in the region, remains in tier three. Officials from Pennsylvania were unavailable to comment Friday.
Mercy Health System, which is based in Conshohocken and has four community hospitals, is in tier three, which is dominated by hospitals affiliated with academic medical centers.
Mercy tried to negotiate into a lower tier, but did not reach an agreement. “MHS remains open to negotiating with IBC on participating as a Tier One provider, so that IBC Tier One members continue to have access to our services,” Mercy said in a statement.
It is far too soon to say how IBC’s tiered network will affect the Philadelphia market because it is uncertain how many people will choose such plans.
Joel Ario, a managing director with a national consultant, Manatt Health Solutions, and a former Pennsylvania insurance commissioner, said it was good to test the plans.
Offering tiered networks on the exchange has the advantage of not forcing consumers into constraints, Ario said. “They will have to decide: Is the price break enough for me to trade off?” he said.
Ario had a reservation, though, about price-based tiers that fail to emphasize quality of care. “If it’s driven solely by price, that might not work as well for the consumer,” he said.
But costs are not always straightforward.
“Maybe the cost-per-episode is more, but you have fewer episodes,” said Paul Fronstin, director of health research at the Employee Benefit Research Institute in Washington.
IBC created the tiered plans in the context of four levels of coverage in the Affordable Care Act, called platinum, gold, silver, and bronze, with platinum the most expensive and bronze the least.
A platinum insurance plan is designed to cover 90 percent of health-care costs, leaving 10 percent for the consumer. A silver plan must cover 70 percent of costs, with 30 percent for the consumer.
For a 40-year-old, the HMO Silver Proactive premium before a possible subsidy is $256 per month, compared with $398 per month for the platinum HMO premium, IBC said.
“If someone can use the tier-one providers, they can get platinum-level benefits in a silver-level product,” said IBC vice president Paula Sunshine. “That was our intention in developing this.”
IBC’s tiers are based on out-of-pocket costs for consumers, with tier one the least expensive and tier three the most.