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December 1, 2014

Insurers push tiered-network plans to CT employers

Jason Gutcheon, broker, Professional Business Insurers
Gil Keegan, head of small group market, Aetna
John O’Connell, president, C.M. Smith Agency
Brian Cuddeback, vice president of sales and client management for Connecticut, Cigna
Matthew Katz, CEO, Connecticut State Medical Society

As Connecticut employers search for ways to rein in healthcare costs, insurers are responding with new benefit plans that rank hospitals and doctors by cost and quality metrics and incentivize consumers to visit providers offering the best bang for their buck.

The health plans, known as tiered networks, have become increasingly popular in other states, but Connecticut has been slow to adopt them.

That could be changing.

Hartford health insurer Aetna is unveiling a new Connecticut plan — Aetna Whole Health — available to small and large employers and individuals that brokers say is the most aggressive tiered network in the state. Bloomfield insurer Cigna and UnitedHealthcare are also now selling tiered network plans.

Insurers say the plans offer potential cost savings by directing patients to high-quality and efficient doctors and hospitals, who can deliver better health outcomes at a lower cost. Employers benefit from a discount on premiums, while consumers are incentivized — through lower deductibles, co-pays, or co-insurance — to visit top tier medical providers.

So far, brokers say, employers aren't rushing into the plans because they're so new and there's still uncertainty over whether they can deliver promised cost savings. But, just as tiered networks have become commonplace in other states, Connecticut employers too will warm up to the concept as time goes on, brokers say.

“It's going to take some time to gain traction,” said Jason Gutcheon, a broker with Professional Business Insurers in West Hartford. “But in 18 months to two years, I think most plans in the state will be tiered.”

Aetna Whole Health

The advent of tiered networks is part of the slow transition the healthcare industry is making from a fee-for-service to a more value-based, pay-for-performance model that encourages quality/efficiency over quantity of care as a way to rein in healthcare costs. For the last few years, insurers have been experimenting on a trial basis with tiered networks in Connecticut, but they haven't become mainstream.

Tiered networks differ from narrow networks, which cut out doctors completely from benefit plans. Tiered networks rank doctors in different groups and charge consumers less for visiting providers in the highest tier.

Aetna's new Whole Health plans are being introduced this week. Gil Keegan, head of Aetna's small group market, said the company doesn't have sales projections for the product.

The plans, which will be available in all counties except Fairfield, split providers into three tiers. Tier 1 providers have an accountable care organization (ACO) agreement with Aetna, Keegan said. They include 29 hospitals, three major physician groups (ProHealth Physicians, Community Medical Group, and St. Francis Healthcare Partners) and about 12,400 specialists.

All other providers that have network contracts with Aetna are in Tier 2. Tier 3 is for out-of-network providers, Keegan said.

Consumers are incentivized to visit Tier 1 providers through discounts on co-pays, deductibles, or co-insurance. In the Aetna Whole Health Gold Plan, for example, a visit to a Tier 1 primary care doctor requires only a $30 co-pay. Visiting a Tier 2 primary care doctor requires the patient to pay out-of-pocket until their deductible is reached. After that, the patient still has to cover 40 percent of the costs out-of-pocket.

Referrals to specialists are required, and emergency room services are covered at Tier 1 levels. On average, consumers will pay 20 percent more visiting a Tier 2 vs. Tier 1 provider, Keegan said.

To help rein in costs, Tier 1 providers are part of Aetna's Connecticut ACO, a pact that encourages doctors to coordinate care and share patient data to improve health outcomes.

Tier 1 primary care doctors are incentivized to refer patients to Tier 1 hospitals and specialists, Keegan said. The upside for doctors is they can share in savings if they control costs and improve patient health. They will focus particularly on individuals with chronic diseases — like diabetes or hypertension — whose conditions can become exacerbated, and much more costly to the healthcare system, when left untreated.

Meantime, employers get a 5 to 7 percent discount on premiums compared to similarly designed plans offered by Aetna, Keegan said. Those savings are derived from clinical efficiency and plan design savings baked into the premiums.

Doctors left out of Tier 1 aren't necessarily less quality providers, Keegan said, but they currently don't have an ACO agreement with Aetna.

Are cost savings enough?

Of course, there are still many questions over the effectiveness of tiered network designs and accountable care organizations, and whether they can deliver meaningful cost savings long-term. Since both concepts are relatively new, they lack a convincing track record.

Still, more U.S. employers are giving them a try. Almost a quarter of companies offering health benefits have high performance or tiered networks in their largest health plan, according to a 2013 survey by the Kaiser Family Foundation.

John O'Connell, president of Hartford brokerage C.M. Smith Agency, said tiered networks can be effective in controlling costs only if they change physician referral patterns. If doctors ignore incentives for sending patients to Tier 1 providers, the system doesn't work. It also requires consumers to be more proactive in seeking out Tier 1 doctors.

“Most doctors aren't aware of the cost implications when making recommendations on where patients should go for services,” O'Connell said.

Tiered network plans also need to provide enough of an incentive for employers to try them.

“Generally, for most employers to go for a more radical approach they are going to be looking for a double-digit savings,” O'Connell said.

Provider pushback

Tiered networks have also created pushback from the provider community. A major concern among doctors and hospitals is that such design plans are driven more by cost than quality considerations, said Matthew Katz, CEO of the Connecticut State Medical Society.

There is also a question of which quality metrics insurers should use to judge providers' effectiveness and efficiency.

“There is no universal way of evaluating a physician for cost and quality,” Katz said. “Many measures out there have never been verified,” or studied long enough to determine if they truly lead to better health outcomes.

Aetna ruffled some feathers a few years ago when it piloted a tiered network that split Connecticut hospitals into three groups. But that plan didn't gain traction among employers, O'Connell said, and some hospitals pushed back and questioned Aetna over its rankings, calling the tiered criteria subjective.

Keegan said Aetna evaluates doctors and hospitals on metrics that look at volume of care, efficiency, quality performance and network adequacy and designates providers with good track records in the top tier.

Clinical performance measurements include hospitals' 30-day readmission rates, patient's average length of stay, and adverse event incidences, among others.

Bloomfield insurer Cigna, which also offers a tiered network in Connecticut, uses evidence-based medicine guidelines when determining its tiered structure, said Brian Cuddeback, Cigna's vice president of sales and client management for Connecticut. The company will look at claims data to track which doctors are performing adequate preventative care like annual mammograms for women or hemoglobin tests and eye exams for diabetes patients.

Cigna also looks at provider's reimbursement rates and other quality metrics recognized by organizations like the National Committee for Quality Assurance and National Quality Forum, which evaluate hospitals on patient safety, quality, and resource utilization.

The top 20 percent of primary care physicians and specialists within Cigna's network make it into the top tier, said Cuddeback, who currently has five employer clients in the state — all with over 250 employees — offering a tiered network plan.

Katz said another concern he has is that independent doctors, which still dominate the Connecticut landscape, have been left out of Aetna's top tier, which would force their patients to pay more for care. Tiered networks can also restrict access to patient care in certain geographic locations, he said.

“These types of deals threaten independent doctors who get excluded from top tiers,” Katz said.

Insurers say tiered plans are simply responding to employers' requests for lower-cost health plan options that can curb the double-digit rate increases that have become commonplace in recent years.

“Employers are looking for a solution, and the tiered option is something the entire marketplace is giving thought to,” Cuddeback said.

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