Blue Cross Backs Off ‘Tiered Hospital’ Idea
Under pressure from hospitals, Blue Cross of California has backed off selling “tiered hospital” policies, which group hospitals by cost and increase co-payments for consumers who use the costlier facilities.
Senior executives at Blue Cross, the state’s largest health insurer, said the company changed course after encountering vigorous opposition from hospitals. Blue Cross has had a contentious relationship with hospitals and recently the insurance company has tried to take a more conciliatory approach.
Tiered hospital plans have come under fire since PacifiCare Health Systems Inc. and Blue Shield of California introduced them this year as a way to reduce premiums and contend with escalating hospital costs.
In a typical tiered plan, a member who goes to a hospital that is on an insurance company’s preferred list pays nothing out of pocket or the minimum coinsurance. But a member who uses a hospital that the insurer considered too expensive would be required to make co-payments of as much as $400 a day or pay a bigger percentage in coinsurance.
A co-payment is a fixed dollar amount that a patient pays for each procedure, such as $10 for a visit to the doctor; a coinsurance payment is based on a percentage of the actual bill.
Hospital officials have complained that tiered pricing unfairly labels hospitals as cheap or too expensive, without taking into account quality, specialties offered and other factors.
Two small hospitals owned by NorthBay Healthcare Corp. in Northern California recently canceled contracts with Blue Shield, upset that their hospitals did not make Blue Shield’s “Choice” list.
Consumer groups have voiced concerns that these kinds of plans penalize lower-income families and steer people to hospitals that are crowded or provide lower-quality care.
Blue Cross executives did not rule out the possibility that they may offer similar tiered hospital plans in the future. And Wednesday, the company took a step in that direction.
Blue Cross officials, in a meeting with officials at major hospitals, said the insurer will place one of four icons next to hospitals in its provider directories. Blue Cross did not describe what the icons would look like, but said each would represent a price category of hospital, from least expensive to most expensive.
Blue Cross said the icons were intended to give consumers information, and it would not offer policies that would charge a higher co-payment or a coinsurance for members who use the more expensive hospitals.
For consumers, these icons may make a difference. In a typical preferred provider organization arrangement, a member pays 20% of the hospital charges, with the insurance carrier covering the rest.
PPO members usually can’t compare prices of similar services from one hospital to another. But with the icons, members may elect to use the hospital that is considered cheaper, and that could lower the overall amount they would have to pay in coinsurance.
Some analysts viewed this step by Blue Cross as a compromise.
“It may be an initial, more palatable first step,” said Larry Levitt, an analyst at Kaiser Family Foundation, a Menlo Park, Calif., health policy organization. “It suggests that every [health] plan is feeling pressure to push back against the hospitals. This kind of approach doesn’t go as far as tiering, but it’s part of a broader effort to fight back against consolidations and rate demands by hospitals.”
Hospital officials had mixed reactions to Blue Cross’ plans.
“I don’t know that if they’re just putting icons, whether people will know what that means,” said JoAnne Tucker, vice president of business services at Hoag Memorial Hospital in Newport Beach. “Everybody is grappling at things that they hope will work, and we just don’t know yet.”
