He’s going the distance, he’s going for speed

The skinniest Exchange narrow networks from 2014 won’t be as skinny for the 2015 open enrollment period.  There are three major drivers.

The first is a federal regulatory driver.  The 2014 regulation required the minimally acceptable network to contract with 20% of the Essential Community Providers in a service area.  An ECP is a center that serves underserved populations.  Federal primary care clinics, family planning, AIDS care clinics are the most common ECPs.  The 2015 regulation is 30% of the ECPS in a service area must be in network.  For most networks, this is a fairly minor tweak, but the skinniest networks will need to add facilities and docs to meet requirements. 

The second is that providers are starting to see that the Exchanges are here to stay and that it is better to get Medicare +8% from an Exchange product than who the hell knows what from the spare cash flow of an uninsured individual.  Mayhew Insurance has seen a steady stream of inquiries of providers who want into the Exchange networks.  They are coming in either to help one or two current patients who switched their insurance, or they are seeing that the Exchanges will improve their bottom lines.  The narrowest and usually the lowest paying networks will probably see the highest percentage increase in provider participation in 2015 as the base level of participation for the super-skinnies would be very low regionally.

The final reason why networks are getting larger is amazingly technical and geeky.  The speed assumption in one of the major geo-access/GIS software packages changed.  

Now what is this and why is it important?

This is important because of how state regulators measure accessibility adequacy is based on some massive assumptions. My state requires each network and product combination to offer adequate access in twenty four categories of providers.  Urban county residents are expected to be able to see at least two  in-network primary care physicians within 20  45 driving minutes.  Rural county residents should see two PCPS within forty five driving minutes. People should see one neurological surgeon within 2o or 45 driving minutes based on county type.    Different states have a different number of provider categories and definitions of “adequate.”  

None of the software packages perfom a point to point, turn by turn actual roadway comparison between every single person who lives in a service area and every single provider.  That would be an amazingly nasty optimization problem that requires much more powerful computers than most insurers want to buy.  Instead, the software packages make a series of assumptions about the location of each individual within a zip code, the location of each provider by category within a zip code  and then imputes a straight line distance calcuation with an average speed.

There are several major flaws in this approach.  Trips have highly variable drive times on a very predictable cycles.  The regional Level III trauma center is 6 minutes from my house at 6:15AM on Saturday mornings, and forty five minutes from my house at 7:22AM on Wednesday mornings.  The software assumes it is 12 minutes for accessibility purposes in all cases.  Not all rural, suburban or urban zip codes are created equally.  One Manhattan mile is treated the same as one Gary, Indiana road mile. 

The change between the 2013 and 2014 speeds is significant. 

Urban assumed speed went from 35mph to 25mph, suburban went from 45 mph to 40 mph and rural speeds dropped from 65 mph to 55 mph.  I think these assumptions are more in line with reality, but they arebig changes.  In an urban county, the coverage radii of a single provider dropped from  11.5 miles to 8.25 miles, for a service area reduction of almost 50%.  In rural areas, the radius dropped from 48 miles to 41 miles for a 30% drop in service area. 

This is a major change for the skinniest networks that are not concentrated in urban counties.  Urban counties tend to have provider density where the minimal number of providers in the network is significantly above any filing guideline.  However, skinny networks in suburban and rural areas will need to either recruit new specialists to provider coverage to outlying/fringe counties, or drop hard to cover counties or write extensive narratives explaining to their state regulators that under the old speed assumptions, the current network is sufficient, recruitment is ongoing, but the current speed assumptions have created new gaps without any changes in the approved provider listing.

Companies will do all three.

17 replies
  1. 1
    catperson says:

    Thanks for these posts, Richard. They’re really interesting and informative. Bonus points for the Cake reference.

  2. 2
    YellowJornalism says:

    Early-morning Cake reference for the win!

  3. 3
    Richard Mayhew says:

    @catperson: Somehow Cake would be the sound track of my late teens and early twenties if a biopic of an amazingly obscure and not too interesting bureaucrat was to be made.

  4. 4
    AkaDad says:

    But is she all alone in her time of need?

    Btw, Cake does a great cover of “I Will Survive.”

  5. 5
    japa21 says:

    Thanks Richard. I had asked a few weeks ago, when you were in the midst of major work issues, if you thought provider participation in the exchanges might mirror what was seen back in the 70’s and early 80’s with participation in HMO’s.

    Early on, providers avoided HMO’s on a large scale due to the lower reimbursement. However, carriers sold a ton of HMO policies and providers realized that they were not only missing out on new patients, but also losing current patients.

    Basically, it appears you are seeing the same thing happening at Mayhew Insurance, and I would expect this trend to continue as enrollments in the exchanges continue to increase.

  6. 6
    skerry says:

    Interesting. It makes me think of the inaccessability that a lot of women have in this country for reproductive health care, particularly abortion services. Some states are down to a single provider. Does this play into the network design?

  7. 7
    mattH says:

    1)This is cool, to know that a somewhat flawed tool, and its “improvement” has an indirect impact on something else.

    2) Typo with Manhattan.

  8. 8
    Richard Mayhew says:

    @skerry: For abortion, no. It is not a required health service.

    Where it will come into play is this type of analysis should be used as clear evidence about the undue burden the TRAP laws impose but the courts don’t give a fuck about that as their sisters, daughters, mistresses can all afford to travel to a blue state or out of the country for a little while.

  9. 9
    aimai says:

    Great post, as usual, Richard. Thanks so much.

  10. 10
    JPL says:

    Richard, How will the Hobby Lobby ruling affect your business model?

  11. 11
    thatguy says:

    I would love to know your thoughts on Steve Parente’s editorial in the WSJ this morning.

    For those who don’t know he’s a health economist who was Romney’s health advisor during the campaign.

  12. 12
    Richard Mayhew says:

    @JPL: If Hobby Lobby wins, it is a pain in the ass on the plumbing end if everyone and their asshole preacher brother can request a non-standard plan, but it is not a big deal as we have riders for everything as it is.

  13. 13
    John S. says:

    So awesome to see all the Cake love. I’ve been a huge fan for years, and always enjoy seeing them live.

  14. 14
    FlipYrWhig says:

    Churning, and burning, he yearns for the cup.

  15. 15
    Suffern ACE says:

    @John S.: I like the albums, but they gave the worst concert performance of a professional band ever when I went to see them. Maybe they were sick or something, but it appeared that they were too drugged up to play, and in fact, the bass player just left the stage for the last 20 minutes of the concert while the lead singer sat down and from time to time, just stopped singing. That was quite a few key members of the band going AWOL.

  16. 16
    Richard Mayhew says:

    @thatguy: Short version — he is full of shit.

    Long version — if you assume that the subsidy structure will be changed so that the feds don’t eat the cost of above average premium growth, if you assume that the appropriate baseline for pricing changes is 2008-2013, especially weighing your model to 2008-2010 (gee what happened to the economy then), if you assume state regulators and political pressure will allow narrow networks to exclude any/all specialists, then he has an argument.

    If one of those assumptions is pressured, much less violated, he is full of shit.

  17. 17
    mattH says:

    @Richard Mayhew: one more reason I’m glad you’re here.

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