Costs will go up for some patients
Confluence Health will be “out of network” for people with health insurance from Premera and LifeWise staring Feb. 1, 2022, meaning these patients will pay more for office visits, specialists and hospital care at any Confluence location.
Confluence announced on Aug. 3 that they were unable to negotiate a satisfactory contract with Premera, “due to Premera’s refusal to pay a rate consistent with other commercial insurance payers in the market.”
Confluence Health operates the Methow Valley Clinic in Winthrop; a clinic in Omak; and the two largest hospitals in the region, Central Washington and Wenatchee Valley, both in Wenatchee. About 36,000 people are affected by the change — 15% of Confluence’s patients, Confluence CEO Peter Rutherford said.
“This decision comes after months of negotiations with minimal movement toward an acceptable agreement, and full support from the Confluence Health Board of Directors. No additional negotiating meetings are scheduled between the two groups,” Confluence said in the announcement. The current contract will terminate at the end of January.
The two companies also have widely different interpretations of the status of the negotiations. “For Premera, we do not believe we’ve reached an impasse. We still have a very long runway to reach a mutually beneficial agreement,” Premera spokesperson Courtney Wallace said by email. “We fully believe we can reach an agreement with Confluence that provides the people we serve with affordable, high-quality health care.”
Confluence and Premera typically have two- to three-year contracts. The companies have been talking since February 2020, but haven’t come close to an agreement, Rutherford said. “We’re quite a ways apart. It’s very disruptive for patients to change insurance companies,” Rutherford said.
Confluence started notifying patients in April that negotiations weren’t promising. They announced the impasse last week so employers would have time to negotiate with a new insurer and people in the individual market would have six months’ notice, Rutherford said.
“We’ve been fielding calls all morning,” since sending out the notice, Confluence Health Director of Marketing and Communications Andrew Canning said. “Unfortunately, patients get caught in the middle.”
As with much of the nation’s arcane health coverage system, there is no one formula for reimbursement. Some services are paid at a specific amount, and others at a percentage of the charge. “It’s kind of complicated,” Rutherford said.
The situation is further compounded by the fact that Confluence, like all health care providers, works with a number of payers, including Medicare, Medicaid and commercial insurance companies. Confluence tries for parity so that all insurers pay the same rate for the same service — otherwise, one company gets favorable treatment, Rutherford said.
“Premera has consistently paid lower than other commercial insurers, and Confluence could not support that contract any longer,” Mike Tuggy, physician manager of the Methow Valley Clinic, said. “We will still be able to see Premera patients, but Premera will consider us out of network and patients may have to pay a larger co-pay to be seen at the clinic if they stick with Premera’s health plan.”
Contracts set “adjustments” that determine what the insurance company will pay. For example, if a physician charges $200 for a service, but the contract covers that service $100 and the patient’s responsibility is 20%, Confluence gets just $100 — $80 from the insurance company and $20 from the patient — and writes off the rest, Canning said.
According to data from the Washington State Office of the Insurance Commissioner, for every dollar Premera collected in premiums in 2020, the company paid out 73 to 82 cents in benefits. Kaiser Foundation Group, which insures the largest number of people in the state, paid out 84 to 97 cents. Most insurers paid from 79 to 82 cents.
Confluence also provides so-called charity care, which gives a discount to people earning less than 400% of the poverty level, meaning the health care provider gets a lower reimbursement, Rutherford said.
Premera contends that Confluence’s dominance in North Central Washington means they have little incentive to make a deal.
“To clear up a few misconceptions — the first is the notion that Premera doesn’t want to pay its fair share. That’s simply not true,” Premera’s Wallace said. “The truth is that Confluence is the largest multispecialty health system in North Central Washington with no true competition within 100 miles. On average, Confluence Health’s hospital costs are higher than all other systems in eastern Washington. There are 12 other health plans that compete aggressively with us in the market.”
Impasses in negotiations between medical providers and health insurers are becoming increasingly widespread. It’s particularly common with larger insurance companies, Canning said. Providence, which has dozens of hospitals and clinics across the state, terminated its contract with Premera in 2017.
The Center on Health Insurance Reforms (CHIR) at Georgetown University has tracked an increase in reporting on contract disputes since 2019. “These discussions are becoming more contentious as insurers face mounting pressure to rein in health care costs while ensuring consumers’ access to providers,” according to health policy specialists who contributed to the CHIR blog. Industry consolidation by both health care providers and insurance companies has exacerbated the situation, they said.
The disputes put patients in a difficult position of not knowing whether they can schedule care at a facility and expect it will be within their network, according to the blog. The problems are magnified in rural areas, where options for medical providers and insurance are more limited.
The insurance commissioner regulates insurance companies and ensures there’s an adequate network to deliver the benefits required by the Affordable Care Act (ACA, or Obamacare) and that the premium is appropriate. But the commissioner isn’t authorized to get involved in negotiations between insurers and health care providers — although occasionally he’ll make a call to try to bridge the gap, said Stephanie Marquis, media and outreach manager for the commissioner. The commissioner is aware of the impasse between Confluence and Premera, she said.
Washington has among the strongest insurance requirements in the country for access to care, including the distance a patient would have to travel to a provider or specialist. Still, because it’s harder to ensure a broad network in rural areas, there are different standards for access, Marquis said.
Each year, insurance companies inform the commissioner of their intention to sell insurance in specific counties through the state exchange, which handles the individual market for the ACA. If an insurer no longer has an agreement with a particular health care provider, the insurer has to show the commissioner how it will maintain an adequate network, Marquis said.
People in larger counties typically have a wider choice of insurers in the individual market. In 2021, three companies, including LifeWise, offered plans in Okanogan County, but in 2019 and 2020, LifeWise was the only option on the exchange.
For 2022, three insurers (including LifeWise) have applied to sell plans in Okanogan County. The insurance commissioner typically decides in September whether to authorize the insurers and rates, Marquis said.
In 2020, Premera and its subsidiaries had 13.5% of the health insurance market in Washington, the third-largest share, according to the insurance commissioner. Kaiser Foundation Group and United Health Group insured the most people, at 20% and 15.5%, respectively. These numbers include both employer-provided insurance and the individual market.
Premera Blue Cross offers a variety of plans through employers and the state exchange. LifeWise is offered only through the exchange, Wallace said.
Even when patients go to an in-network hospital, they may get an unexpectedly high bill because an individual physician may not be a hospital employee. As of January 2020, Washington outlawed surprise (balance) billing. Under the law, when patients receive care at an in-network hospital, the most they can be billed is the in-network cost-share.
As a nonprofit health care system that’s obligated to provide care regardless of a patient’s ability to pay, Confluence faces a dilemma, Rutherford said. “The insurer is in the business of paying for the care, not providing the care,” he said.
“Despite Confluence’s decision to end the negotiation, we believe it is in the best interest of our customers and the community that we continue these critical conversations, as this type of discussion takes time and isn’t a sprint,” Premera’s Wallace said.