By Rose Hoban
Gov. Roy Cooper signed a bill into law last month that’s been touted as a way to create insurance plans that could bring costs down for small businesses that want to give their employees a health care benefit they otherwise might not have been able to afford.
The new law allows for employers to offer employees access to “exclusive provider organizations,” or EPOs, which are insurance plans that limit a person’s choice of health care providers to a constrained selection of doctors and hospitals.
The law goes on the books as state lawmakers and the governor continue the perennial debate over how to get more North Carolinians covered by health insurance. North Carolina’s rate of uninsurance is 11.4 percent, more than the national average and the ninth highest in the country, according to the Kaiser Family Foundation.
EPOs, lawmakers said when pushing the bill through the General Assembly, could offer an option for small businesses looking to offer a benefit to their workers that’s cheaper than most other insurance options and won’t break the company budget.
Here’s a quick lesson in EPOs and how they differ from health maintenance organizations, or HMOs, and preferred provider organizations, or PPOs, all those letters that can make shopping for insurance a test of knowing your acronyms.
- PPOs (preferred provider organizations) are insurance networks that favor a specific network of providers, but also reimburse a consumer to see any provider from outside the network. The insured customer would then have to pay more (but not the entire cost) to see the out-of-network provider. PPOs usually have deductibles that have to be met before the insurance coverage kicks in. They are usually the most expensive plans for both employers and employees.
- HMOs (health maintenance organizations) provide insurance coverage for a set monthly fee. HMOs allow the covered person to see a smaller network of providers, and usually require that the person see a primary care provider to get permission to see a specialist. Insurance premiums tend to be lower than for PPOs and there’s often a smaller deductible. Some out-of-network services, such as dialysis or emergency care, can be covered.
- EPOs are plans that limit consumers to an even more narrow network of hospitals — sometimes even only one hospital — and the providers associated with that network. Often, the EPO will require a patient to see a primary care provider before going to a specialist. There is no coverage if a patient goes to an out-of-network provider, except for emergencies or if the network doesn’t have a needed specialty. EPOs often limit people to a geographic area for care, and have higher deductibles, but lower premiums.
For some people, having an EPO could mean that they can’t go to a favorite doctor who might not belong to the network. Only providers who are in-network get paid, in contrast to the more expensive PPOs. One academic review of EPOs found that one way of reducing costs is by “steering patients away from high-cost hospitals.”
If a patient does go outside of their EPO network, it could cost a lot of money out of pocket, creating an incentive to stay within the network.
The big trade off for these plans is that monthly premiums tend to be lower.
Read the fine print
Nonetheless, as the ACA rolled out and the online ACA insurance marketplace evolved, more insurance providers created plans with limited choice on providers and hospitals in an attempt to keep costs down. Consumers embraced the marketplace plans.
During the runup to the passage of the 2009 Affordable Care Act, critics of the bill decried then-called narrow network plans as limiting the choice for consumers. That led President Barack Obama to famously say, “If you like your doctor, you can keep him.”
By 2019, about 20 percent of plans offered on the insurance exchanges were EPOs, according to a market analysis by Avalere, a national health care consulting firm. Taken together with HMO plans, the consultants found plans with narrower networks than traditional insurance comprise almost three-quarters of all ACA insurance marketplace plans.
“Provider networks are getting narrower, which means it is more important than ever that patients understand what kind of plans they are buying,” said Chris Sloan, director at Avalere.
There are downsides to those narrow network plans, she said.
“Unknowingly enrolling in a narrow network plan could lead to patients being unable to see their preferred doctor or go to their most convenient hospital,” Sloan said in a press release.
An analysis published this year in the journal Health Economics found that “narrow network plans are partly able to achieve lower costs because they both steer patients to lower cost hospitals, and for a given hospital, negotiate lower prices than broad plans.”
Using that negotiating leverage results in about a third of the potential savings, the authors wrote.
The balance of the savings comes from the fact that people who tend to enroll in EPOs use less care, such as young people who have few health problems but who may want the reassurance of ongoing coverage. They go for the EPOs because they’re often looking to lower their premiums.
Interestingly, the authors note that patients in EPOs use the emergency department more and end up getting charged more when they do, which can whittle away at any savings. They noted that the types of conditions seen in out-of-network emergency departments are “less plannable: cardiac arrest, injuries, poisoning, anxiety disorders.”
Finally, EPOs may end up with lower premiums because more of the copays, deductibles and other out-of-pocket costs get shifted to patients.
“A $3000, $5000 deductible is a sledgehammer of a tool to keep people from using services,” said Duke health economist Dave Anderson. “It’s successful at that, but it’s not getting people to the care that they actually need.”
When introducing the bill to allow employers to offer EPOs, Sen. Chuck Edwards (R-Flat Rock) claimed in front of the Senate Health Committee in April that exclusive provider organizations could save a family as much as $4,200 a year on a health plan. He cited estimates from the Kaiser Family Foundation that a family insurance plan runs about $1,750 per month, and that an EPO could cut those costs.
His bill targets smaller businesses that buy plans from large insurance companies, such as Blue Cross Blue Shield of North Carolina. Large companies which are self-insured can already offer employees such plans, they pay all of the costs of their own insurance plans, which are regulated by a federal law known as ERISA that gives them more flexibility. But for smaller businesses, which have to buy insurance on the retail market, EPOs have been unavailable.
“All of us came down to Raleigh this year, with somewhat of a battle cry to help expand health care coverage to North Carolinians,” Edwards said. “I would suggest to you this bill does exactly that.”
Other legislators expressed concerns about the limitations on providers.
“I have some concerns about a patient’s ability to have continuity of care,” said Rep. Gale Adcock (D-Cary) at a follow-up House committee meeting in August. For example, “if you’ve been seeing the same cardiologist for 20 years and your cardiologist is not in this narrow network because they wouldn’t negotiate down to whatever the going price was.”
Edwards said that in the various adjustments to the original bill, he had addressed issues about continuity of care. Those adjustments made it through the legislative process into the final bill that was passed in early September, giving members time to make the switch to a provider in-network.
Will they really create savings?
“Health care use is expensive,” said health economist Marisa Domino from the Gillings School of Global Public Health at UNC Chapel Hill, “and health insurance that covers health care use is expensive.”
“It’s a sort of societal decision about what’s the package of services that we think a typical person should be protected from overextending your finances.”
Domino concurred that EPOs might not work well for consumers who’ve had a long-term relationship with a provider, or who need specialty care.
“There are plenty of people who may not be the best candidates for it, who might select the cheapest health insurance plan because they want to save those premium dollars, only to find that trade off, that reduction in premiums came at the expense of having fewer providers available to them.”
According to David Smith, who’s a former president of NC Association of Health Underwriters, EPO-like products have been evolving into the market for some time.
“For example, both Aetna and Blue Cross appear to be headed toward what they’re both calling along the lines of ‘high performance networks,’ where they’re going to one provider in a particular town or region, and not to the other,” Smith said.
He compared such plans to what Blue Cross and Blue Shield North Carolina has done with creating individual policies that steer consumers into one health system, such as Duke or UNC Health, over another.
He said that the cost differential for consumers choosing a PPO with a broad network versus a narrow network EPO can be “significant,” as much as 20 percent less.
“From my end, from a pure consumerism perspective, if I’m an employer, and I choose to go with a broader network, and it’s going to cost me a little bit more money, but I know it’s going to reduce the headaches, it’s going to give people access to the doctors they want to see and everything else, sometimes it’s worth that,” he said.
But for the narrower plans, Smith said, there’s a learning curve for consumers to understand that out-of-network is a no-go.
“I think that’s going to be the area where helping people understand, that is going to be a little hard,” he said.
He also said he doesn’t expect the cost differential to last for a long time, as the plans mature and savings get absorbed by insurers.
Domino and other health economists contacted by NC Health News agreed. They also agreed on another point: that North Carolina’s insurance market would likely be in better shape if more people had health insurance. The Kaiser Family Foundation calculated that in 2019, only about 46.3 percent of North Carolinians received insurance through an employer, below the national average of 49.6 percent.
If more people were covered, there’d be fewer unpaid bills that hospitals and health care providers are looking to cover. And one way to get more people covered would be to expand Medicaid, they all noted. The economists also noted that expansion would likely provide many more North Carolinians with coverage than widening the use of EPOs.
EPOs will not likely be available for the 2022 plan year. Most insurers are setting their plans and rates for next year already and according to a spokesman from the state Department of Insurance, temporary rules governing the design of the plans have not yet been adopted, nor have there been any filing for EPOs yet.