Blue Promise: Are Insurance Networks Really Necessary?

Health insurance networks come in all shapes and sizes. But are they really necessary? In this Blue Promise conversation, two experts from Blue Cross and Blue Shield of Texas offer their insights to the purpose and value of networks -- Shara McClure, Divisional Senior Vice President of Health Care Delivery, and Rick Haddock, Vice President of Network Management.  

You can also listen to this discussion in podcast form on Apple Podcasts and SoundCloud 

Blue Promise is a podcast and online video blog that aims to address complicated health issues with candid conversations from subject matter experts. New editions are published regularly and are hosted by Dr. Dan McCoy, President of Blue Cross and Blue Shield of Texas, and his co-host, Ross Blackstone, Director of Strategic Influence. 

Show Transcript

DAN: Insurance networks come in all shapes and sizes but are they really necessary?

[MUSIC]

Thanks for joining us for this edition of Blue Promise I'm Dr. Dan McCoy. I'm the President Blue Cross and Blue Shield of Texas. I'm here with my co-host Ross Blackstone.

ROSS: Thank you Doctor McCoy. We have two guests here with us today Shara McClure Divisional Senior Vice President of Health Care Delivery for Blue Cross and Blue Shield of Texas and Rick Haddock is Vice President of Network Management for Blue Cross and Blue Shield of Texas. Thank you both for being here. You know health insurance can be really confusing for so many people so this is an opportunity for us to just kind of break things down to the basics. So if we could just start off by asking you guys to kind of just define what is an insurance network a health insurance network? Shara, you want to...

SHARA: Yeah I'd be happy to. So it's very important to have health insurance network because we take care of 5.5 million Texans with Blue Cross and Blue Shield of Texas plus a couple of other million Americans. And we have to have providers who can provide services medical services for them when they get sick or ill or need preventive care. And so just think of a network as a list. A list of hospitals, a list of doctors, and on that list for provider to be on that list they have to agree to certain things. They have to agree to a price, they have to agree to provide services without extra billing to the patient, and they have to have gone through a rigorous quality and credentialing process.

DAN: So Shara, let me ask you a question, for I would say for years in this country mostly there were very few networks. So have we seen a growth in the number of networks in the last couple of years?

SHARA: Just a little bit yeah because I remember when I came to Blue Cross almost 13 years ago we only had three networks but now we're up to 18 networks and really that's because of the different choices that we like to give to our members and sometimes it's based on a more affordable or a broader network that provides that variation and sometimes it's based on how that Texan and or how that member gets their coverage whether it's through their employer through the public health exchanges or through government programs like Medicare or Medicaid.

DAN: But I think the keyword use there was that these increase in the number of networks is all about choice. It's giving people a lot more choice and what product they actually purchase.

SHARA: Exactly. It's about choice affordability and access.

ROSS: So if I could Dr. McCoy maybe before we get into the differences of what types of different networks there are out there let's just make sure everybody understands what the purpose is of these networks and maybe why providers would even want to join that. There's 90 percent of America's hospitals and doctors are part of a network. So, Rick why why would a provider or a doctor want to join a network? What's the benefit for them?

RICK: Yeah. Thanks Ross. So when you look at where the majority of the population of our membership is they're associated with a product that Blue Cross delivers to our customers and so in order for a provider to be able to have access to those members they need to be part of a network because if they're not part of a network that we have then the likelihood that they're going to be able to see the patients at an affordable price is going to be minimized.

ROSS: Okay So what's the purpose of it? What does it do to the actual network?

RICK: So what the network does is it provides members access to physicians and hospitals and other ancillary provider types and it provides them choice at an affordable price. And I think one of the key components of a network is being able to have choice as well as being able to offer it in an affordable way.

DAN: So Rick let me ask you kind of get focused on a couple things you just said there you said one is affordability. So if you've got a provider which in case would be doctor, hospital, or others in that network you've pre-negotiated maybe an advantageous price for a member in that regard. But there's also advantages for the provider too right, to be in network. What are some of those advantages for both those groups?

RICK: Yeah. So again from the member perspective as you alluded to in as Shara mentioned earlier is that those providers will they there's certain contractual requirements that that they have to agree to and abide by when they become part of our network. One of the key components of that is to accept a discounted rate for the services that they render to our members and return what the provider receives is greater volume because of the membership that we serve here in the state of Texas that that provides them and affords them the opportunity to have more members access their office which then creates additional revenue stream for them to cover their costs make a little bit of profit.

DAN: And this is a big issue right now. There's a protection for members right to seeing in the network provider. What's one of those protections?

RICK: Yeah that's and that's one of the critical pieces so we had mentioned earlier about the fact that a provider has to enter into a contractual obligation with us and in that contractual obligation they agree to not bill the member for services that end for dollars that are above what they've agreed to accept. So in other words if a provider bills us three hundred dollars for a particular service and we only pay that doctor one hundred dollars what that provider agrees to in that particular situation is to not bill the member for that additional two hundred dollars, that they accept the hundred dollar rate that we've defined as part of our contract.

ROSS: So Dr. McCoy I have a statistic tied to what you guys are talking about. America's Health Insurance Plans reports that the average out of network billed charges were up to 1000 and 23 percent of the amount paid by Medicare. So it's pretty expensive if members choose to go or if a person choose to go out of network for the coverage that they provide but the prices for the procedures can vary pretty greatly, right Shara, depending on what network you're in or where you go can you elaborate on that a little bit?

SHARA: I can and it's true most of our prices for physician services are fairly standard but for hospitals they're negotiated and so Rick and I and our teams work with hospitals to agree on those prices that the hospitals will take. And we see that variation in our network and a lot of times it just depends on how popular the hospital is or how desirable it is for a member to be able to access that hospital and so you see some hospitals that have strong locations, unique services, and great brands that, that get a higher price than others because that's who our members, that brand speaks to them. And so there the market is willing to pay a little more for some of those.

DAN: I think it also kind of raises that. Let's talk a little bit about one of the challenges that consumers have with these networks. So you talked about the advantages, one advantage of course is that they have choice and they get better value for what they want but I think it can also be said that the choice comes with a challenge because there's not just one network anymore now consumers have to decide if their doctor is in this specific network to tell me how we address that or what does the industry do to address that?

SHARA: I think it can be complicated we do our best to educate. We do our best to make to make tools available online so that a member like I said we have 18 networks a member needs to know what network they're in so that they can go on our online provider finder choose that network and then get their unique list of providers who have contracts with us or in that network.

DAN So I think in general and correct me if I'm wrong here but I think in general most of these networks would be considered adequate meaning that they are regulated by the state regulator to make sure that they have all the necessary providers to be appropriate for a network but that doesn't necessarily mean that that person's individual physician is in the network. Is that right?

SHARA: I think that's a good point. So Texas Department of Insurance as well as other regulated... regulating authorities like CMS, Centers for Medicare and Medicaid Services, they publish adequacy standards and they're usually in the form of geography. So maybe a network has to have a primary care physician within a 30 mile radius So...

DAN: As an example.

SHARA: ...as an example and so think about just a big a big you know area of land and you have to have a primary care physician or a hospital covering that entire geography. But like you said adequacy is it's a standard. It's a regulated...

DAN: It's a minimum.

SHARA: ...it's a minimum standard but we also we're in a competitive environment. So we want to make sure that we not only meet adequacy but we offer that choice we want to we want to have enough providers for our members to feel like they can access the services.

DAN: And I think I just wanted to kind of get across the point that, that these networks come with tremendous advantages for members it sounds like because they have maybe more focused choice lower costs maybe they are they fit their family or personal profile better but it also means that you might need to do a little bit of research before you change networks just because your doctor may or may not be in there. You can't rely on history to dictate that.

SHARA: Agree.

ROSS: Yes just talk to that point. The price can vary anywhere from you know knee surgery in Dallas can be sixteen thousand dollars to forty six thousand dollars so you know researching and really can have an impact to a person's financial bottom line. The other point that you were making Dr. McCoy about just kind of knowing what's out there the health literacy is that the Kaiser Foundation surveyed nearly 13 hundred adults and asked them 10 questions about their health insurance policy only 4 percent got a perfect score 68 percent only 68 percent were able to you know get a 50 or above. So there's a lot of people who just don't really have the information that they need to make good decisions.

RICK: And I think to that point there Ross I think that's where we have the responsibility to members to to be able to provide them in a transparent way to the best of our ability what the cost of health care services are and with the development of the various networks out there each network may have a different cost for the same service and not only as Shara mentioned earlier not all not only are there geographic opportunities as it relates to what the cost of rentals might be but it also may be determined by the site of service of where the member goes. So you may have not only one hospital being more expensive than another hospital or one physician being more expensive than another physician but in the event that a member chose an elected to go to a non-hospital setting for it as an example for outpatient surgery they may want to go to an ambulance, ambulatory surgery center that is probably more cost effective and will maximize that members benefits as opposed to if the member ends up going to a hospital setting and gets that same service.

DAN: So we've talked a lot about the advantages of being in network So what's the corollary? What's the disadvantage of being out of network?

SHARA: The disadvantage of being out of network is number one the payment might not be predictable for that provider. If they don't have a contract that tells them what they'll be paid they're not sure what they'll be paid and we see variations in different plans that we sell could be based on employer could be based on what kind of product it is but that predictability on what to be paid is one advantage and also the access to the patients they know that by being in the network members will go to that list or go to that provider directory and know that they can actually be accessed.

DAN: So it sounds like to me that when you go to an in network provider a lot of the work has already been done for a member, because you've negotiated, you've set up rules. They understand how to bill. There's no surprise billing, but if you go out of network you really rely on yourself to negotiate your price you may have some challenges related to what that cost is going to be.

SHARA: That's true and we find that a lot with members there are certain types of providers or certain providers that are out of network.

DAN: So let's talk about that just a minute because I think most of the discussion today has been around, oh if I'm going to buy any policy right I need to do my research make sure my doctors and network, but there are some challenges sometimes even when you want to be in network and knowing whether or not your physicians in network so tell me a little bit about those challenges because I think consumers need to be aware that they might do everything they can but there there's a challenge.

SHARA: I think the most common, the most common issue that you're describing is maybe when your hospital is in network. So I need to have surgery I'll go look at a hospital that's in the network. I choose that hospital but then I might find out later that the anesthesiologist who put me to sleep for the surgery was not in the network.

DAN: And they're not necessarily required they're not required to be in network even if they work at an in network hospital.

SHARA: That's true. We would like it. It would be helpful if they were but Texas laws and some of the regulations don't require hospitals to have these positions in the network.

DAN: Yes, let's talk about that for a minute so if you could theoretically be going into surgery and you might not really know until you're about to be put to sleep that the anesthesiologist is not a network.

SHARA: That's true or you might not know until you wake up. I mean it could be in the paperwork that you have to sign before you have the surgery but sometimes patients are surprised even after the services are performed.

DAN: So it sounds like to me you've kind of outlined another kind of consumer requirement that even when you think you're doing everything, if you're going to have a surgery you're gonna be putting yourself in a situation where you could be exposed to multiple different providers and have well let's just say a little bit of a challenge in the time of doing a research because if you're not wearing clothes on a surgery tables it's probably hard to get access to your iPad, so if you're doing that you might need to talk to your doctor in advance and find out if anesthesia is covered, if there's gonna be an assistant surgeon, if there's going to be other people involved in your care. Is that fair even if you're going to in network?

RICK: Absolutely that's absolutely correct and there's some other physician specialties that are associated with a hospital that may not be a network that you may not see so as an example you may see the anesthesiologist as you had alluded to prior to the surgery but in the event that there are other services rendered during that that surgery or post to that surgery like radiology you may end up getting a quote surprise bill from a radiologist who read your imaging study but you never saw that radiologists so there's multiple examples to the point that you made about surprise billing and physicians that you may receive a bill from so asking questions of your physicians as it relates to who all will be involved in your care is extremely important.

DAN: So Rick I'm a little shocked here because you may not know the answer to this billing me can I go down this path so are our physicians and health care providers required to tell you that they're in network or out of network? Is that required?

SHARA: They're supposed to. There are, there are laws that have been passed that or disclosure laws...

DAN: But not in every situation.

SHARA: ...or not necessarily in every situation. Some of those laws are state laws, Texas laws which govern Texas insured coverage.

DAN: So basically what you're saying is there is no uniform, or uniform required like announcement that you have to know before you go into a surgery that maybe my anesthesiologist is out of network? You don't have any choices.

DAN: Not necessarily which really pays to be a smart consumer and ask those questions ahead of time as Rick was describing.

DAN: Great. 

ROSS: But if I if I am a consumer, Rick. I'm just John Doe and I'm thinking that's your job. Your job is to make sure that these doctors that everybody, everyone should be in my network to make sure that they that they're that I don't have to worry about this or I don't have to ask these questions, yet they aren't. So explain to us why not.

RICK: So part of what we do though, Ross, I think that's important for you and others to understand is that through our contractual obligations that we have both with hospitals and the physicians that are performing the surgery we do our best and through the contract to require them to utilize in network providers there are situations as I just described where there are hospital-based physicians like the anesthesiologists, or the radiologist, or potentially an assistant surgeon that will not be in the network the reason why they don't join the network is purely financial. In most situations.

DAN: Well let me ask you a question though and why wouldn't a hospital require them to be in network? If you're going to be if you're going to be doing anesthesia at a hospital and hospital credentials or picks an anesthesia provider. Why doesn't a hospital just require them to be in network?

SHARA: We'd like for them to. In Texas there's no corporate practice of medicine law so that the hospitals can't necessarily or they're not supposed to employ the physicians and the hospitals say that they cannot require per their their contracts with the anesthesiologist to cover that. To cover their emergency room or cover their operating room for anesthesiologist or cover their labs.

DAN: Because I think that's an issue for consumers because I think you know consumers may go to the emergency room thinking and my hospital is a network but they may find out quickly that the emergency physician that is not or they may go have surgery and they've done all this research on quality about their orthopedic surgeon to get their hip replacement and then they figure out that their anesthesiologist or the radiologist is not in network so the take home message from me here is that networks are a huge advantage because all the work's been done, no surprise billing, lower cost but there's still a little bit of work on behalf of the consumer just to make sure you're not surprised or taken advantage of by the system.

ROSS: But how can it be financially beneficial for a doctor to not be in the network? I mean essentially that means that they're expecting that patient to pay that forty six-thousand-dollar bill for knee surgery but who can afford that? So how are they getting paid? How is it financially beneficial for them to stay out of a network?

RICK: So in the example that we described about a surgery in a patient getting a surprise bill from what we're calling the hospital based physicians, in that particular instance the member doesn't make the overt decision as it relates to who the provider of care will be so in other words they don't make the decision who's going to read their imaging or who's going to perform the anesthesia or administer the anesthesia on their behalf so what ends up happening in the state of Texas and it happens in other states as well unfortunately there are laws that are designed to protect the member but they also protect the provider. And by that I mean there are situations where a provider can actually get paid more by being out of network and that situation centers around emergency care and or some of the hospital based providers because there are some hold harmless provisions that are out there where the member has to be protected from certain bills related to the services that might be rendered.

SHARA: And I'll add that I think a lot of these are intended to protect the consumer but they can be exploited and I think Ross I heard you mentioned earlier that the average billed charge for many providers is in excess of a thousand percent of Medicare so 10 times more more than 10 times more than what Medicare would pay if a benefit or a consumer protection law is designed so that that provider gets paid their billed charges you can imagine that they're doing the math and they're figuring out that that works to their advantage.

ROSS: And who actually pays the bill? Is it Blue Cross Blue Shield of Texas? Is the insurers that have to pay that bill?

SHARA: It depends sometimes it's the insurer and sometimes it's the self-insured employer or the self-insured group.

DAN: So it's the company that the person might actually work for.

SHARA: It could be.

ROSS: And at the end of the day that's gonna probably end up driving the premiums for everybody else up a little bit higher so what I'm what I'm kind of getting at is it's really in all of our best interests to encourage our loved ones even to ask, make sure you're going a network because what's you're doing could affect my premium.

SHARA: You're right If you don't pay now you might, you'll be paying later in another way.

ROSS: Right.

DAN: Let me tell you this I think it's in everyone's best interest to listen to this podcast because I've learned a lot today about the value being in network. Shara and Rick thanks for being here today and thanks for joining us for this episode of Blue Promise.

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