PAMED officer discusses how Obamacare patients, providers suffer from Highmark cuts
“Many providers, especially smaller practices, cannot continue to operate a business with unexpected reimbursement decreases, as small business expenses and potential revenues are budgeted for the year,” Dennis Olmstead, chief strategy officer at Pennsylvania Medical Society (PAMED), recently told Patient Daily. “When a stream of revenue dries up, it affects the ability of the practice to operate efficiently and effectively. Remember, these decreases were unilaterally implemented. No discussion, no negotiation, no consideration to the needs of the provider -- no analysis of the quality of care provided.”
Olmstead explained that consumers are also affected by these reimbursement decreases.
“As smaller independent practices can no longer afford to provide quality care, many sell their practices to larger organizations, retire or move into non-patient care jobs,” he said. “As provider and other organizations get larger, they have more negotiation power with health insurers like Highmark, and it seems like an anathema to Highmark actions. As providers get larger, they can extract additional monies from insurers, which in turn raises premiums, which in turn affects the ability of business or individual buying the insurance. Market power has been shown over and over to raise prices.”
Olmstead explained that what is leading to so much loss on the part of insurance companies is that Highmark cut fees and hiked premiums after losing money on product underpricing.
“Remember that Highmark not only cut its fees to providers, but it also imposed significant premium increases on their ACA individual market products -- over 20 percent in most cases,” Olmstead said. “Highmark lost a significant amount of money on these products over the last two years, due to underpricing of their products and due to unexpected utilization of this newly insured population.”
Olmstead also explained that miscalculations, or an overt attempt to buy the individual market by low-balling other insurance companies, is neither the consumer nor the providers’ fault. Yet, these are the two groups that are paying the price at a time when Highmark maintains significant reserves -- reaching into billions of dollars. He argues that the possible remedy for this situation is that Highmark use their reserves to cover their losses and create more accurate pricing of their products.
Olmstead also stresses what should not be done.
“Use of providers who have little choice to drop out of Highmark networks, due to the market power of Highmark in a number of markets in Pennsylvania, should not be a remedy,” he said. “In markets like Erie, Altoona, Johnstown, etc., Highmark has 60 percent or more of the market for selling health insurance and for the buying of provider services to deliver the care.”
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