THE REAL problem with the Obamacare network in New Hampshire is not that it is too narrow. It is that there is any network at all. Health care costs are lowered not when the one government-sanctioned insurer picks winners and losers. They are lowered when providers compete for the customer pool. The oddly constructed health exchange in New Hampshire is not the beginning of the future, but the last gasp of the past.
Under the Affordable Care Act (ACA), commonly known as Obamacare, the federal government created a set of regulations to offer approved health insurance in what was optimistically called an exchange. In theory — and in some larger states this sort of worked — multiple insurance companies would offer competing products, albeit ones that were all constructed according to the thousands of pages of regulations that limit differences.
In New Hampshire — and this wasn’t actually a surprise to anyone — it didn’t work that way. We don’t have a lot of competition in the regular health insurance market, Only one company, Anthem, signed up to be the government insurer. This is where the trouble started.
Insurance companies worried that the population would be somewhat sicker than typical and have fewer young people than they’d like. Young people consume very little health care, so their premiums are profit used to subsidize others. In fact, we’re discovering the population is much sicker and older than previously thought.
To control costs, Anthem did what so many exchange insurers have done across the country: it developed a narrow network of hospitals and affiliated doctors. At first, half of New Hampshire’s hospitals were in and half out. But under pressure they added back in a few small, rural hospitals. Right now there are 16 winners among hospitals and 10 losers. Naturally, the 10 that have left out of the government-subsidized health insurance system are worried.
The use of preferred providers and networks of allowed providers was common in the 1990s era of HMOs. It is making a comeback. The Kaiser Family Foundation reported that narrow networks in employer plans rose from 15 percent to 23 percent in the last six years. On ACA exchanges across the country, narrow networks account for 70 percent of the plans.
The reason is cost. Exchange plans are not like regular private insurance. They need hospitals and their doctors to accept a significantly lower payment that your insurance gives them. The deal offered is that providers will get less money, but more market share because some competition is excluded.
In April, the Congressional Budget Office found that costs will likely be $1.38 trillion rather than $1.48 trillion over 10 years, or about 7 percent lower than they would have been. The CBO said exchange plans have narrower hospital networks, lower payment rates, and tighter management of use of care (think HMOs) than regular insurance does. The networks are trimming costs by limiting options, just like HMOs used to do. Obamacare is taking us back to the ‘90s, not into a better future.
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.