RIDING THE WAVES OF NETWORK ADEQUACY
David E. Bryant, MD, Chair TSA Economics Committee
Sherif Z. Zaafran, MD, Chair TSA Governmental Affairs Committee
For several years a good number of TSA members have been addressing the issue of network adequacy. This topic has been a time consuming and tumultuous flood with peaks and troughs along the way that have led us to our current circumstances in the Texas Legislature. How the TSA, TMA, Texas Department of Insurance (TDI), insurers and Texas Legislature steer the ship will determine the product consumers will be able to obtain.
What is a Complete Network?
Below is how the Texas Department of Insurance (TDI) describes Network Adequacy in its Draft; Rules on Network Adequacy.
Adequate number of preferred provider physicians with admitting privileges reasonably near where one lives.
Adequate number of providers to allow choice, access, and quality within one’s area.
Have hospital services within one’s area.
Have access to 24 hour ER services.
In rural areas, the location might be within 30 miles.
How might State Expectations on Insurers requiring Complete and Transparent Networks affect Consumers and my Practice?
Pressure to Negotiate with Providers for Services:
The pressure by the TDI upon insurers provides pressure to those insurers to offer complete networks. With an “inadequate network” any care delivered by an “Out‐Of‐ Network” (OON) provider is merely dismissed as the provider refused to be in network.
The advantage to the insurer who does not need to market a plan based on adequacy, is that they do not have to make efforts to negotiate with providers. The financial risk is merely shifted to the consumer.
Requirements of Transparency:
When one purchases a health insurance product like a Preferred Provider Organization (PPO) or the new Exclusive Provider Organization (EPO) where one is either directed or required to see a physician who is in network, one would want to compare features as well to compare products.
There are reasonable metrics that could be provided to give the consumer some insight to compare adequacy. Transparency of these metrics pushes
David E. Bryant, MD
both insurers and providers to contract for services. Insurers risk having a poor network exposed and not purchased. Providers risk de‐selection by consumers. Both providers and insurers are incentivized to balance their demands on price and reach equilibrium. This is how free‐markets bring the best products to consumers at the correct price and the informed consumer is the winner.
Brief History and Civics Lesson:
In the mid 2000’s the Texas Legislature became interested in network adequacy when a series of complaints by consumers that facility based physicians were not innetwork leading to OON billing.
Senate Bill 1731 in 2007:
The 79th Texas Legislature in 2007 passed SB 1731 to study Network Adequacy. SB 1731 required the TDI to study the issue of OON Facility Based Physician and Network Adequacy. TDI created a committee headed by Diane Long. The committee also included the TSA’s very own Debbie Creath Plagenhoef, MD.
Out of the committee’s efforts, the TDI requested that insurers provide data regarding Facility Based Providers including in‐network and OON charges, payments, and allowables. It was determined that overall 90% of all anesthetics were delivered by in network providers as well as all services delivered by hospital based providers.
It was also determined that most of the OON bills were generated under one payer and that payer, Plan E, happened to be the largest payer in the State at that time. Most of those OON balance bills occurred despite 95% of providers being in network with this payer. The magnitude of Plan E’s OON balance bills was due to their method of allowable determination. Most payers determined OON allowable by multiplying around 90% by the billed charges, then paying 80‐90% of that as their portion.
However, Plan E allowed typically a payment that amounted to about 40% of billed charges creating a very large OON balance bill. This shift;ed the bulk of the OON risk onto the patient and away from Plan E.
Another important discovery that emerged from this study was that there were several insurers that had very “incomplete” networks of providers. At one of these committee
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