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In California, faceoff between major insurer and health system shows hazards of consolidation

Annie Sciacca, KFF Health News on

Published in Health & Fitness

For weeks, more than half a million Anthem Blue Cross enrollees who receive health care from the University of California were held in suspense. It wasn’t clear whether they would have to find new doctors or switch plans as the health system and one of its largest insurance partners struggled to reach agreement on a new contract.

UC Health accused Anthem of not negotiating in good faith, while Anthem leaders retorted that UC Health had demanded too much and rebuffed the insurer’s request for administrative efficiencies. In fact, roughly 8 million Anthem members in California were at risk of losing in-network access to UC Health’s vast network of prestigious hospitals and medical facilities, which could have left them with much higher out-of-pocket expenses. While not all patients were made aware of the situation, Anthem notified some enrollees they would be reassigned to new primary care doctors if no deal were reached.

But even as the parties announced an eleventh-hour agreement on Feb. 5, industry analysts say the conflict has become part of a trend in which patients are increasingly caught in the crossfire of contract disputes. Amid negotiations over rising labor and equipment costs, it’s often patients who are ultimately saddled with higher bills as the health industry continues to consolidate.

“This type of contract dispute is a routine feature of the health care system,” said Kristof Stremikis, director of market analysis and insight at the California Health Care Foundation. “At the same time, from a patient’s perspective, it’s an unfortunate feature of our health care system because it creates uncertainty and anxiety.” (California Healthline is an editorially independent service of the California Health Care Foundation.)

Stremikis noted that as mergers occur in the health industry, patients are left with fewer choices. Any time there are disputes, disruptions are felt more widely. And such fights rarely result in lower costs for consumers long-term across California.

A KFF analysis found widespread evidence that consolidation of health providers leads to higher health care prices for private insurance. The same brief from 2020 found some evidence suggesting that large, consolidated insurance companies are able to obtain lower prices from providers, but that has not necessarily led to lower premiums for patients. And a 2022 report from the California Department of Health Care Access and Information found that health care costs have grown “at an unsustainable rate,” and noted that between 2010 and 2018 “health insurance premiums for job-based coverage increased more than twice the rate of growth for wages.” State regulators also found that health plans spent nearly $1.3 billion more on prescription drugs in 2022 than in 2021.

 

In trying to slow growth, California in 2022 set up an Office of Health Care Affordability, which has proposed a 3% spending growth target for the industry for 2025-2029. But enforcement will start in 2028 at the earliest, using spending data from 2026.

Cathy Jordan, 60, a social worker in Yuba City, California, has been a patient at UC Davis Health for two decades. Jordan was diagnosed at the end of 2021 with aggressive small cell carcinoma, a rare form of cancer. She has undergone surgery, chemotherapy, radiation, and other treatments since then, yet her cancer has returned twice.

“I don’t have the luxury of time — my cancer comes back fast,” Jordan said.

She is among the group of Anthem-insured patients at UC Health who were at risk of losing access to in-network care there, and when she got a notice from Anthem, she grew alarmed, she said.

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©2024 KFF Health News. Distributed by Tribune Content Agency, LLC.

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