Speak Easy Tiered plans just starting to be studied

SpeakEasy is a running feature in NJBIZ in which we recap presentations given by key business leaders around the state at one of New Jersey’s many conferences and events.

Kate Ho, an economics professor at Columbia University, has been watching the impact of tiered networks as well as their growing popularity around the country.

At a recent event in Princeton held by the New Jersey Health Care Quality Institute, Ho discussed “what economists are trying to do to understand effects of tiered networks” by looking at data reports in the last few years.

“Tiered networks have gained popularity nationally as a method to control cost,” Ho said, adding that, as a result, data has only just started rolling in and economists have been able to begin analyzing it.

Most of the known data has come in from Massachusetts, specifically looking at what the state’s employee benefits plan and Blue Cross Blue Shield have done.

BCBS in Massachusetts first implemented a three-tiered network plan in 2007.

In 2012, the Massachusetts Group Insurance Commission included new incentives for a limited network plan, which included a three-month holiday premium.

How individuals weighed the benefits proved interesting, she said.

“Consumer behavior is very sensitive to financial incentives. This premium holiday caused 10 percent of employees to switch plans,” Ho said. “The healthiest people, not surprisingly, were the most likely to switch.

“In addition, they found that the enrollees that could switch without changing their insurance carrier or their primary care physician were 60 percent more likely to switch than anybody else.”

Switching meant spending 36 percent less than the old plan for a marginal group of people.

While the quantity of care received reduced, the quality of care did not, Ho said.

“Not surprisingly, patients did travel further to get to a hospital than they had before,” she said.

When the hospitals were re-tiered periodically, based on cost and quality, it affected consumer choice for use of the hospitals, Ho said, citing a study.

During the study period of 2009 to 2012, 44 percent of hospitals changed tiers, and when an insurer dropped one of the most popular hospitals from an Affordable Care Act plan on the exchange, 40 percent of patients switched away from using that hospital.

Others, she said, simply switched away from the plan altogether.

“That raises questions about access,” Ho said.

Should the government subsidize bigger, more expensive hospitals in order to ensure access for enrollees?

Or should the insurer just wait and see if those who switched away eventually return?

More questions remain as data continues to roll in from tiered plans popping up around the nation.

One of those questions is: What will happen to hospitals in non-preferred plans, and those which on lower tiers?

“The tradeoff between ensuring access and controlling costs will be interesting to see,” she said.

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