California's health insurance rates for a new state-run marketplace came in lower than expected this week, but one downside for many consumers will be far fewer doctors and hospitals to choose from.
People who want UCLA Medical Center and its doctors in their health plan network next year, for instance, may have only one choice in California's exchange: Anthem Blue Cross. Another major insurer in the state-run market, Blue Shield of California, said its exchange customers will be restricted to 36% of its regular physician network statewide.
And Cedars-Sinai Medical Center, one of Southern California's most prestigious and expensive hospitals, said it's not included in any exchange plans at the moment.
Those types of exclusive arrangements, increasingly tight networks and outright exclusions are becoming more common as insurers and government officials search for ways to hold down rising medical costs.
The vast majority of Californians get their health coverage through their employers and won't be immediately affected by these limitations in the state-run market. But private companies are pursuing similar changes to shave costs. More employers have been adopting these narrower networks and the government's overhaul of the individual insurance market is accelerating the trend.
Some consumer advocates express concern that insurers will go too far and deprive patients of meaningful choices. State officials sought to blunt that criticism this week, pointing out that the 13 health insurers selected will offer access to about 80% of California's practicing physicians and hospitals.
"If we want to keep costs down, something has to give," said Betsy Imholz, special projects director for Consumers Union. "At first blush, it seems like Covered California has negotiated some good deals, but in any given community we will see how this network issue plays out."
Covered California, the state agency implementing the federal healthcare law, said these trade-offs are necessary in many cases to keep premiums reasonable for California's families. Officials said they took steps to ensure that health plans offer an adequate number of quality medical providers and have measures in place for expanding their networks in the event that more people than expected sign up.
More than 5 million Californians are expected to be eligible for coverage in the exchange, and about half of them could qualify for federal premium subsidies.
Details on these insurance networks aren't known yet as insurers and providers wrap up their contracts and await regulators' review in the coming weeks. It's possible some medical groups and hospitals could be added.
Health Net Inc., another exchange option in Southern California, said it expects to seek state approval to use its existing network, which includes both UCLA and Cedars-Sinai, for one of its exchange plans.
Once all those decisions are finalized by early July, Covered California said it will help consumers find out online whether particular doctors and hospitals are in a health plan's network. Enrollment in the exchange opens Oct. 1 for policies that take effect in January, when most Americans must have health insurance or pay a penalty.
"When people come to choose their plan, we will have a directory so they can make sure Dr. Ramirez is in these three plans, for instance," said Peter Lee, executive director of Covered California. "Consumers care about that information."
Meanwhile, some insurance agents said it's hard to judge these proposed prices in the state exchange without knowing what's on the menu in terms of available providers.
"Trying to determine whether these rates are low or high without knowing the provider networks is like trying to tell the value of a car when you can only see the tires — you don't know if you are looking at a Ferrari or a Yugo," said Bruce Jugan, an insurance agent in Montebello and president of Benefitscafe.com, which sells health insurance to individuals and businesses.
Paul Markovich, chief executive of Blue Shield, said renegotiating with hospitals and physician groups for lower reimbursements was a key factor for insurers in holding down rates. Medical providers are sometimes willing to accept lower payments in return for higher patient volume from these narrow networks.
Markovich said premiums for Blue Shield's existing individual policyholders will rise 13% next year on average for coverage under exchange plans.
That marked an improvement from earlier predictions of even bigger rate hikes. The state issued a report in March that estimated premiums for many consumers could go up 30%, on average.
Premiums are generally rising to reflect the federal law's requirements for richer benefits and guaranteed coverage regardless of people's medical history.
"The physicians and hospitals that signed up for our network have agreed to accept lower reimbursement specifically to make the exchange more affordable," Markovich said.
Blue Shield's exchange network in the Los Angeles area doesn't include UCLA or Cedars-Sinai. Instead, it features hospitals such as Keck Hospital of USC, Long Beach Memorial and St. John's Health Center. Blue Shield said its statewide network for exchange policies will include about 24,000 physicians, compared with 66,000 doctors in its full preferred provider organization roster.
In Los Angeles County, state officials expect 1.6 million people to be eligible for coverage in the exchange. Premiums will vary based on a person's age, location and level of coverage.
For instance, in the north Los Angeles County region, the rates for a 40-year-old purchasing a Silver plan range from $222 a month for Health Net to $294 a month for Kaiser Permanente. There will still be other individual policies for sale outside those offered through Covered California, but federal subsidies can be used only inside the exchange.
Health Net sees growing acceptance of these narrower networks. The Woodland Hills insurer said enrollment among employers in California, Arizona and Oregon in those smaller networks has grown 37% in the last year.