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intend to limit access to high-costing specialists and technologies.318 Consumers are attracted to narrow network health plans, typically as a result of their low premium amount.319 The health system’s decision to enter into the health insurance market will involve more than merely hiring a third-party administrator or an actuarial company and retrieving reserve capital.320 The new provider-owned health plan will require a unique and detailed plan design, an integrated claims processing system, customer service, and marketing.321 The costs associated with health systems becoming health insurers may also act as a barrier to the transition.322 The initial start-up costs for a system to start its own plan for an integrated network can be steep.323 Additionally, to become an insurer, a hospital must acquire an additional state license.324 To receive the license, the hospital must have “millions of dollars in capital reserves and must run a regulatory gantlet to prove it has an adequate provider network and can delivery required benefits.”325 The pool of health systems that have the ample resources necessary to obtain a license and meet capital reserve requirements is narrow.326 Further, a study that researched hospital- insurer integration found that insurance plans that were offered by hospitals had higher premiums.327 Health systems that implement a provider-sponsored health plan take on full clinical and financial responsibility, which can initially appear overwhelming.328 To implement a health plan, health systems must establish
Bane?, COMMONWEALTH FUND (Feb. 24, 2014), http://www.commonwealthfund.org/ publications/blog/2014/feb/narrows-networks-boon-or-bane. 318. Rabin, supra note 253; see Blumenthal, supra note 317 (noting that the most expensive doctors and hospitals are typically excluded in a narrow network plan, which can be a major problem for patients with complex and rare health conditions). 319. Summer, supra note 316. 320. Gary Ahlquist et al., Several Hundred Health Networks Will Become Payors, STRATEGY& 1, 3 (June 20, 2014), http://www.strategyand.pwc.com/reports/health-networks- become-payors. 321. Id. 322. Herman, The Risks, supra note 257. 323. Id. (noting that a health system should anticipate spending around $50 million to start their own health plan, “which could limit other capital investments”); see Herman, More Health Systems, supra note 258 (noting that the “safest option for provider systems for now . . . may be offering insurance products that serve a narrow population, such as a Medicare Advantage or Medicaid plan, or creating loose partnerships with insurance companies”). 324. Rabin, supra note 253. 325. Id. 326. Kelly, supra note 311. 327. Austin Frakt, supra note 267 328. VALENCE HEALTH White Paper, supra note 240, at 1. Although assuming risk may appear overwhelming, “[t]he reality is that taking on more risk can ultimately yield more benefits.” Id. Studies demonstrates that thirty to forty percent of all medical expenses are wasteful and thirty cents of every health care dollar is spent on administrative costs rather than
