Adequate to Inadequate

TDI Undoes Network Adequacy Rules 

 Texas Medicine Logo 

Law – March 2013 

Tex Med. 2013;109(3):21-25.

 By Amy Lynn Sorrel 
Associate Editor 

Four legislative sessions spanning nearly a decade. At least three pieces of legislation. Years of study by insurance officials and a state-appointed committee made up of physicians, hospitals, health plans, and consumers.

All of that wasn't enough for new leadership at the Texas Department of Insurance (TDI) to implement already adopted rules that, at the legislature's request, finally defined an "adequate physician network" in PPO health plans, says Texas Medical Association Past President William W. Hinchey, MD. He served on the workgroup that studied the issue and whose work ultimately led to legislation and rules that set some standards to protect patients from unexpected bills for more expensive out-of-network care, so-called balance bills.

Although her predecessor, Mike Geeslin, approved them for adoption in July 2011 to take effect in May 2012, current TDI Commissioner Eleanor Kitzman rescinded those regulations in December 2011.

In their place, TDI released newly drafted rules last November that physicians say undermine the legislature's mandate to hold health plans accountable for their networks and instead shift that burden to patients by removing important safeguards.

On top of that, TMA officials worry the new rules lower the bar for even more limited "exclusive" provider organization (EPO) networks that health plans can now sell, instead of making insurers adhere to uniform network standards.

In its biennial report to the legislature, the agency told lawmakers it planned to adopt the new rules in early 2013, although formal adoption was still pending at press time.

Insurance officials contend a lack of consensus on the adopted rules, coupled with more recent legislation passed in the midst of developing the PPO network adequacy rules, prompted the need for revisions. Those factors also underlie TDI's decision to delay final implementation of the new regulations until it gets further guidance from lawmakers.

Dr. Hinchey says the years of work and state resources poured into the issue are guidance enough.

The original rules tracked standards already in place for HMOs, he says. "So we have a precedent. What this boils down to is if [health plans] are going to sell a product, they have to first make sure it's a good one. And if they don't, they can't punish the patient."

The San Antonio pathologist says the earlier rules struck a balance that impacted all stakeholders: Patients had more information so they could make an informed choice and have less concern about unexpected bills. And both physicians and insurers had to negotiate in good faith.

"Now we may have to spend more time and political capital on this, when we should be focusing on other important issues affecting patients," Dr. Hinchey said.

TMA Vice President for Medical Economics Lee Spangler added, "The lack of consensus is an inadequate rationale for the department to ask for the legislature to craft a solution, without first giving the previously adopted rules a chance to work. Former Commissioner Geeslin understood that the legislature asked the department to develop a regulatory mechanism that benefitted the consumer."

Commissioner Kitzman and her staff refused Texas Medicine's offers to comment for this story.

 A Complete 180 

The new PPO rules retain some of the originally adopted network adequacy criteria that limit how far patients must travel for primary or specialty care and that establish basic payment criteria that track federal health reform rules for out-of-network services. For example, the Patient Protection and Affordable Care Act (PPACA) sets a floor for paying out-of-network emergency claims.

But TMA officials point to the removal of key provisions they say tip the balance in favor of insurers by weakening their responsibilities to contract with enough doctors and patients' ability to assess their coverage.

The newly proposed rules strip requirements that PPOs notify patients and regulators when the number of in-network physicians and hospitals substantially decreases and disclose in writing basic network demographics, such as the number of preferred specialists in a given region.

In addition, health plans would no longer have to:  

  • Give patients information on the percentage and amount of out-of-network claims filed with a particular insurer;
  • Designate the status of a preferred network that does not comply with network adequacy requirements as a "limited hospital care network";
  • File a network adequacy report when renewing a waiver from the requirements; or
  • Give certain information to selected physicians who must certify whether a waiver is warranted. 

TMA officials also warn that certain changes may limit some of the original protections meant to give patients full credit for certain out-of-network expenses toward their annual plan deductibles and out-of-pocket maximums if they have to go out of network for care.

The newly proposed "Preferred and Exclusive Provider Plans, Exclusive Provider Benefit Plan Requirements" are available online.

TMA filed comments opposing the new rules, in conjunction with the Texas Society of Anesthesiologists, the Texas Society for Gastroenterology and Endoscopy, the American College of Obstetricians and Gynecologists, the Texas Association of Obstetricians and Gynecologists, the Texas Radiological Society, the Texas Orthopaedic Association, and the Texas Urological Society.

The previously adopted network adequacy rules were the culmination of years of debate that began in 2005. (See "A Long History.") It started with a charge to the Senate Committee on State Affairs to study network adequacy and balance-billing issues and led to the creation of the Health Network Adequacy Advisory Committee in 2007 under Senate Bill 1731.

Those discussions took shape in 2009 when the legislature passed House Bill 2256. It required state insurance officials to adopt network adequacy standards that "ensure availability of, and accessibility to, a full range of contracted physicians and health care providers." It also gave patients recourse to resolve disputes with their health plans over out-of-network bills.

The Texas Association of Health Plans, which also participated in the workgroup, did not respond to Texas Medicine interview requests.

Health plans argue that balance bills largely are the result of physicians' reluctance to contract with insurers.

TMA's 2012 Physician Survey results show otherwise: Seventy-five to 85 percent of physicians contract with at least one of the five major health plans in Texas. (See "Physician-Reported Contractual Relationships.") Of those who were not contracted but requested to join a network, 48 percent eventually signed a contract, 31 percent said they received an offer that was unacceptable, and 22 percent said the plans did not respond to their requests.

Dr. Hinchey also pointed to a 2009 workgroup study that showed 90 percent of claims filed by facility-based specialists in pathology, anesthesiology, radiology, and emergency care – services most often the subject of balance bills – were in network.

The state's five largest PPOs collected that data.

"Just because doctors have the right to balance bill for an out-of-network service doesn't mean they necessarily do it, nor does it mean they are always successful in collection of a balance bill," Dr. Hinchey said.

He added that often health plans offer physicians payment rates well below the cost of providing care or change contract terms without giving doctors the opportunity to renegotiate.

In approving adoption of the earlier rules, the insurance department under Mr. Geeslin concluded they were "necessary to assist [patients] and group contract holders to more accurately assess the risk of unanticipated balance bills," and to "incentivize insurers to contract with adequate numbers of physicians and providers as a matter of competition." The department at the time also rejected health plans' objections that potential administrative burdens warranted elimination of the earlier rules.

Commissioner Kitzman reversed course, however, and suspended implementation of the former rules in December 2011, just after the legislature authorized insurers to offer potentially more affordable, but more limited, EPO networks under House Bill 1772.

She said the amendments were necessary to align regulations for both PPO and EPO networks "to ensure consistency within the market."

In doing so, TDI took out provisions it suggested could mislead patients and lead to increased premiums.

In the preamble to the newly proposed regulations, TDI staff acknowledged concerns that the rules "relaxed requirements for insurers" and could "result in less transparency for consumers."

But the department contends insurers already have to make listings available to patients on their websites and regularly update them. And the new rules would still require health plans "to pay 'usual and customary' charges to physicians, if necessary, to protect policyholders from balance-billing issues when a complete network solution is unavailable," the legislative report says.

On the other hand, TDI now says disclosing out-of-network claim amounts or decreases in network participation doesn't necessarily give patients a timely or accurate view of the status of a health plan's network. Contract negotiations may only temporarily affect a network, and the additional reporting requirements could translate to higher plan costs for patients.

In their place, the new rules require insurers to report whether they've obtained a waiver from the network adequacy standards for certain specialists, which "the department believes … will be of more practical use" to current or prospective policyholders.

Other provisions would still give patients recourse to challenge insurers if a listing is outdated and to get their out-of-network care paid.  

Double Standard? 

But TMA officials say that puts the burden on patients to chase after insurers, when state laws intended for health plans to provide up-front protections to avoid balance billing in the first place.  

"If patients have more information, they can make a more informed choice, and that's going to lower their costs," Dr. Hinchey said.

Making sure health plans have robust networks is even more important before they introduce new products into the market, Mr. Spangler says. That includes EPOs, which have more stringent out-of-network restrictions than PPOs and only cover emergency services provided by non-network physicians and hospitals.

Instead of holding health plans to a higher standard for these networks, the new rules lower the bar for both, TMA officials say. They also further exempt EPOs from existing insurance regulations by, among other things, requiring less up-front proof to regulators of their networks' completeness.

In addition, TDI's broad definition of closed EPO networks could allow health plans to indirectly contract with physicians for limited services, yet still count that to meet their network adequacy requirements. That could be unfair to patients trying to discern their coverage and to physicians who may not realize a contract they directly negotiated with one party has been "rented out" by that party for other purposes, TMA officials warn.

All of these changes also could have broader implications for insurer conduct in federal health insurance exchanges established by PPACA, Mr. Spangler says.

The federal reform law mandates that health plans participating in the exchanges cover a set of minimum benefits, or "essential health benefits," such as preventive and wellness care, emergency services, mental health services, pediatric care, and prescription drugs. States that require plans to cover services beyond that must defray those extra costs.

Some Texas health plans argued to TDI that crediting patients' out-of-network expenses toward their deductibles as the adopted rules currently do could count as a state-mandated benefit that the state would then have to pay for.

The federal Department of Health and Human Services (HHS) says that such cost-sharing would not count as a "benefit," which refers to treatment.

But TMA asked the federal government to put that in writing in its final regulations governing essential health benefits.

The association also asked HHS to set more specific minimum network adequacy standards that, among other things, require insurers to prove they have sufficient networks before offering plans in the exchanges. If states have a more stringent standard, that higher standard would prevail.

In Texas, that remains to be seen.

Based on the state's past experience, "we know a general standard doesn't work," which is why lawmakers intervened in the first place to command new, more specific rules, Mr. Spangler says. "The legislature told TDI what to do. Now it's the department's job to figure out how to do it."

TDI contends the current rules represent a "high standard" and its "best efforts to protect consumers and meet legislative mandates within the confines of TDI's authority," the biennial report says. "Still, the approach arguably represents a 'slippery slope' of governmental intervention in contractual relationships between private parties. Accordingly, TDI's rule on network adequacy will not be fully implemented until after the Texas Legislature adjourns to allow the only entity with policymaking authority over all parties to provide additional guidance."

Dr. Hinchey agrees the department does not have the authority to get in the middle of physician-insurer negotiations. "But that's not what these rules are about. And they [insurance regulators] do have the authority to make sure that if health plans are going to sell these products, they have an adequate network in place."

Amy Lynn Sorrel can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.  

 SIDEBAR 

 A Long History 

 2005     

  • Senate Committee on State Affairs is charged to study reimbursement of health care plans for out-of-network claims, adequacy of health plan networks, and balance billing.

2007     

  • Senate Bill 1731 directs the Texas Department of Insurance (TDI) to work with an advisory committee and make recommendations to the legislature.

2009     

  • Health Network Adequacy Advisory Committee and TDI report to the legislature.
  • House Bill 2256 requires TDI to write rules on network adequacy and allow patients to mediate out-of-network claims.

2011     

  • Former TDI Commissioner Mike Geeslin adopts PPO network adequacy rule to be effective in May 2012.
  • House Bill 1772 creates new "exclusive" provider organization (EPO) networks.
  • Newly appointed TDI Commissioner Eleanor Kitzman suspends adopted PPO rule.

2012     

  • TDI withdraws 2011 rules and proposes new regulations for both PPOs and EPOs, with anticipated adoption in early 2013.

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