HIGHLIGHTS FROM OIC REPORT BELOW … Practices where patients pay a monthly fee for primary health care services lost 35 percent of enrollees and raised their fees by 23 percent between 2012 and Dec. 1, 2014.
By Annie Zak, Staff Writer, Puget Sound Business Journal
DECEMBER 2, 2014 – Just five years after direct health care [direct primary care] practices were attracting venture capital money in Seattle, enrollees are dwindling.
These practices, where patients pay a monthly fee for primary health care services, lost 35 percent of enrollees and raised their fees by 23 percent between 2012 and Dec. 1, 2014, according to a new report from the state’s Office of the Insurance Commissioner.
The best guess as to why this is happening? The Affordable Care Act.
As more and more people are able to buy health insurance through state exchanges and Healthcare.gov and as some states have expanded Medicaid eligibility, patients who used to utilize these direct health care practices could be turning elsewhere for their treatment needs.
“We knew before health care reform there were a lot of people who had health insurance but were under-insured. There were a lot of services they needed that their coverage wouldn’t take care of,” said OIC spokeswoman Stephanie Marquis. “Maybe they didn’t have prescription drug coverage, maybe they had a high deductible and couldn’t access their care. Direct care practice was a way to get access to care.”
Now, though, many of those barriers to access have changed with the coming of the ACA.
“(This decrease), I think that’s partly due to people being able to find other ways to get health care,” Marquis said.
One main issue with direct practices is that an insurance company isn’t involved. The OIC went to the state Legislature in 2007 to create some sort of regulation and light reporting rules for the practices, hence the new 2014 report.
As of June, there were approximately 8,658 direct practice patients in Washington at 29 practices around the state, according to the OIC’s report. Fees at those practices ranged from $25 to more than $200 per month, and the most expensive was $910 per month.
So, is the future of these direct health care practices in peril? Marquis doesn’t necessarily think so.
“They came out of some pretty significant innovation for need at the time, so I would imagine we’re going to see another iteration of those,” she said. “There’s been a lot of money invested in these and I don’t expect them to go away immediately. They’ll just find new ways to adapt.”
- Three practices closed during fiscal year 2013: Doctors Clinic of Spokane, Healthcare-4-Life and Liberty Lake, with a total of 74 enrollees.
- Sixteen direct practices reported a total decrease of 5,277 patients with direct practice agreements.
- Seven clinics reported a total of 58 new patients, gaining two to 13 patients per clinic. The monthly fees for these direct practices are between $91 and $208. One of the new clinics reported 220 enrollees with a monthly fee of $200.
- For fiscal year 2014, only one direct practice, Qliance, reported it is participating as a network provider with a health insurance issuer in side the Washington Health Benefit Exchange (Exchange). This is a significant change for this direct practice, which has been in operation since 2007 and is one of the original and largest direct practices in the state .
- Complaints received: The Insurance Commissioner’s consumer hotline received no formal or informal complaints regarding any of the direct patient practices in fiscal year 2014.
- Voluntary data reported by direct practices: While all of the registered practices responded to the mandatory questions, less than half of the direct practices chose to report voluntary information — some reported they did not collect this information and others did not respond to any of the supplementary questions.
- Necessary modification to chapter: The Commissioner is not recommending any modifications to chapter RCW 48.150 at this time.
- Paladina Health Care Group of WA reported a significant decrease in direct practice enrollment regulated under Title 48. This direct practice also provides services to self-insured groups, which are not regulated by the Office of Insurance Commissioner.
- Twenty-one of 29 direct practices participate as in-network providers in a health carrier’s network; this is a significant change since 2007, when all direct practices reported they were exclusively direct-patient provider primary care practices.
- Twenty-five of these practices reported the percentage of their business that is direct practice. Twelve practices, or 48 percent, reported a less than 12 percent (1 in 9 patients); eight of the practices reported less than 2 percent.
- Fees at 13 of the direct practices remained the same as last year.
- Six direct practices increased their monthly fees; five practices’ increased fees $4 to $17 per month, and one practice increased fees by $50 per month.
- Seven direct practices decreased their fees by$2 to $5 per month.
- The four new direct practices’ fees range from $50 to $200 per month.
- Between fiscal years 2013 and 2014, the average monthly fee weighted by the number of patients increased by 23.4 percent, from $122.18 to $150.78.
Affordability of direct practices
A key assumption underlying the legislation was that direct practices could provide affordable access to primary services. In theory, this would reduce pressure on the health care safety net or relieve problems caused by a shortage of primary care physicians, and possibly lower emergency room use.
Monthly fees at direct practices vary from $50 or less to more than $200. Most enrollees pay $101 to $200 per month. Data is not collected about the affordability of these fees for the people who are enrolled.
A comparison of the annual statement information collected by the Commissioner shows major growth in fiscal year 2014 for enrollees who pay $101 to $200 a month.
Reasons for this growth include: a rate increase at one direct practice that moved enrollees up to this category and the addition of 220 new enrollees in this category at a new direct practice.
Impact on the uninsured
The survey asked direct practices if they collected information about other types of health coverage the patient has when they sign a direct practice agreement. Only 16 direct practices out of 29 reported this information. The number of individuals reported as uninsured were:
- Fiscal year 2014: 1,315 or 15 percent
- Fiscal year 2013: 2,754, or 21 percent
Because direct practices are barred by law from billing carriers for primary care services, if enrollees have private insurance, the assumption made is that these patients are combining high-deductible plans with direct practice primary care. Direct practices often recommend that their patients combine direct practice enrollment with a high-deductible insurance plan.
- Fiscal year 2014: 16 direct practices reported 3,657 enrollees who had private insurance
- Fiscal year 2013: 10 direct practices reported 5,596 enrollees who had private insurance
- The percentage of enrollees with private insurance was 42 percent for fiscal years 2013 and 2014.
Federal health care reform
On March 23, 2010, the President signed The Patient Protection and Affordable Care Act (PPACA), commonly referred to as the Affordable Care Act (ACA). It required the development of health benefit exchanges, beginning in 2014, to help individuals and small businesses purchase health insurance and qualify for subsidies that are available only for plans that are sold through an exchange.
An exchange cannot offer any health plan that is not a qualified health plan.9 A qualified health plan must meet requirement standards and provide an essential benefit package as described in PPACA.10 Essential health benefits include at least the following general categories and the items and services covered within the categories:
(A) Ambulatory patient services.
(B) Emergency services.
(D) Maternity and newborn care.
(E) Mental health and substance use disorder services, including behavioral health treatment.
(F) Prescription drugs.
(G) Rehabilitative and habilitative services and devices.
(H) Laboratory services.
(I) Preventive and wellness services and chronic disease management.
(J) Pediatric services, including oral and vision
Since September 23, 2010, PPACA requires new health care plans to eliminate any cost-sharing requirements with respect to evidence-based items or services that have in effect a rating of A or B in the current recommendation of the United States Preventive Services Task Force.
The Exchange bill
In 2012, the Washington state Legislature passed E2SHB 2319, “An act relating to furthering state implementation of the health benefit exchange and related provisions of the affordable care act,” generally referred to as “The Exchange Bill.”
Section 8 (3) of the bill, now codified as RCW 43.71.065(3), allows the Exchange Board to permit direct primary care medical home plans, consistent with section 1301 of the PPACA , to be offered in the Exchange beginning January 1, 2014.
Section 1301 (a)(3) TREATMENT OF QUALIFIED DIRECT PRIMARY CARE MEDICAL
- The Secretary of Health and Human Services shall permit a qualified health plan to provide coverage through a qualified direct primary care medical home plan that meets criteria established by the Secretary, so long as the qualified health plan meets all requirements that are otherwise applicable and the services covered by the medical home plan are coordinated with the entity offering the qualified health plan.
The future of direct practice
These provisions raise questions about the direct practice model of care, specifically in the following areas:
- How will direct practices operate under the PPACA?
Direct practices are not insurers and are authorized to offer only primary care services to their direct practice patients and not comprehensive health care. Under PPACA, they cannot be a qualified health plan eligible for sale through the state Health Benefits Exchange.PPACA does specify that a “qualified health plan” may provide coverage “through a qualified direct primary care medical home plan.”11 Thus, a direct practice may contract with a carrier to provide the primary care services included in the carrier’s qualified health plans.In fiscal year 2014, only one direct practice, Qliance, reported it is participating as a network provider with an health insurance issuer in the Exchange. This is a significant change for this direct practice, which has been in operation since 2007 and is one of the original direct practices as well as one of the largest.
- How does PPACA affect consumers with existing direct practice agreements?
The individual mandate responsibility provision of the ACA required the purchase of health insurance no later than March 31, 2014. Direct practice agreements provide primary care services only and do not qualify as health insurance so they do not meet the individual mandate requirement.The Washington Health Benefit Exchange (Exchange), branded as Washington Heathplanfinder, opened in late 2013 to sell policies effective January 1, 2014. Enrollment both inside and outside of the Exchange for the individual market showed a dramatic increase, with approximately 76,000 more health insurance enrollees than in 2013.12Benefits for individuals who purchase policies through the Exchange include: Entitlement to subsidies or premium tax credits if they meet income requirements. These financial incentives are not available outside of the Exchange, and receiving them may result in enrollees canceling direct practice agreements; The requirement that all health plans must cover essential health benefits, including preventive services and chronic disease management. A consumer who enters into a direct practice agreement with a primary care provider outside of the Exchange most likely pay twice for some primary care, preventive services and chronic disease management services that are also covered by their individual insurance plan; and PPACA sets limits for maximum out-of-pocket expenses. A maximum out-of-pocket expense is the sum of the plan’s annual deductible and other annual out-of-pocket expenses other than premiums that the insured is required to pay, such as copayments and coinsurance for a High Deductible Health Plan (HDHP)13 Consumers’ costs associated with a direct practice outside of the Exchange may not count as cost-sharing expenses for the HDHP. For example, a direct practice provider is not a network provider and cannot bill health carriers regulated under chapter 48 RCW for health care services. The consumer would not benefit from direct practice monthly fees counting toward annual maximum out-of-pocket expense limits.Direct practices reported a significant decline of enrollees for fiscal year 2014, losing 4,715 or 35 percent of their clientele. An assumption could be made that a significant number of these patients either enrolled in health plan through the Exchange or on the individual market. In addition, some individuals probably qualified for Medicaid due to new income requirements.Two of the direct practices that stopped providing direct practice services reported they referred their patients directly to the Exchange for enrollment.
For direct practices that charged $75 or less a month, patients dropped from 3,250 to 1,187, a decrease of 63 percent.
- Nothing in federal health care reform bars direct practice arrangements from operating outside the Exchange.Exclusive direct practices that cater to wealthier consumers and offer more of a concierge model of care would most likely still have a market. On the other end of the spectrum, a market exists for direct practice agreements to individuals not entitled to buy health care coverage through the Exchange, including undocumented immigrants. Additionally, some consumers join direct practices because they like the personal services offered and will continue with their direct practice agreements.
Recommendations for legislative modifications
Washington is at the forefront of national regulation of direct primary care practices. Since passage of the 2007 law, direct primary care practices have not gained significant market share, but have expanded into 11 counties in the state.
Washington’s Exchange ran open enrollment for fiscal year 2014 plans from October 2013 and through March 31, 2014. It is highly likely that direct practices were impacted by enrollees switching to comprehensive health insurance during this time. Direct practices reported a 35 percent drop in enrollment for fiscal year 2014, losing a total of 4,715 enrollees. One of the largest direct practices became a network provider for a health insurance issuer in the Exchange for 2014.
Open enrollment begins on November 15, 2014 for 2015 health insurance coverage.
The Commissioner does not have any recommendation for the Legislature to consider other than continuing to monitor direct practices using annual statements and consumer complaints.