Lowering costs by forcing doctors and insurers to compete for millions of new patients is a primary goal of the nation's new health care law, but a group of gastroenterologists in the East Bay and internists near Chico are exposing a fissure in that plan.
There often aren't enough doctors to go around.
In parts of the state, the shortage of doctors participating in California's new insurance exchange is providing new leverage for medical providers to hold out for higher reimbursement rates from big insurance companies. And as a game of chicken unfolds behind the scenes between two powerful groups that are key to the law's success, the insurers are often caving in to the doctors, raising concerns that the trend could catch on and drive up the price of health insurance premiums on the exchange.
Medical costs are the largest component of a health insurance premium, said Darrel Ng, a spokesman for Anthem Blue Cross of California. And the higher those costs go, he said, "the higher the premium will likely be on the exchange in the future."
Many doctors are upset about the discounted reimbursement rates that insurers have imposed on them to keep premiums low on the Covered California exchange. The new rates -- as much as 30 percent lower than those paid by nonexchange plans -- took effect Jan. 1, when the new health care plans of hundreds of thousands of Californians kicked in.
The number of doctors who have had their old rates restored is still small compared to the 58,000 physicians that Covered California says are participating in the new marketplace.
Whether these side deals will ultimately raise rates on the new exchange isn't clear yet. But health care experts wonder what the trend portends for the success of the law, which depends on attracting hordes of consumers to lower-priced insurance policies.
As more people sign up for the expanded Medi-Cal program and private plans on the exchange, "there will be a surge in the demand for doctors," said Glenn Melnick, a health economist at the University of Southern California.
But because there's a fixed supply of physicians, he predicted, many doctors will be able to tell the insurers: "Wait a second. You delivered us a promise, and I'm busier than ever, and you need me. But I don't need to agree to a discount anymore."
Central to the standoff are state regulations that require insurers to provide their customers access to primary care physicians within 15 miles or 30 minutes of their homes. Plans also are required to have a primary care physician-to-patient ratio of 1 to 2,000, and an overall physician-to-patient ratio of 1 to 1,200. If for some reason the health plan does not have a particular type of specialist, the plan must find such a provider.
In many cases, the winners in the doctor-insurer faceoff are physicians in rural regions, where health care services are scarce. But the table-turning has also surfaced in the Bay Area and other metropolitan regions.
"Most doctors want to take care of patients," said Dr. Richard Thorp, president of the California Medical Association, a lobbying group that represents about 40,000 of the state's 104,000 licensed physicians. He's also an internist who belongs to a 12-member group practice in Paradise, near Chico, that was able to reinstate its old fees with Blue Shield of California.
"But they have to make an individual choice based on whether they can afford to service those contracts," Thorp said. "That is the reality."
Blue Shield and Anthem Blue Cross, two of the four largest insurers offering Covered California plans, acknowledged that they are reinstating some old rates.
Blue Shield spokesman Steve Shivinsky said the insurer has restored rates for 1,400 California physicians, many of whom practice in rural areas, to ensure adequate medical care is available. Yet he said that's still "a tiny fraction" of the majority of its 35,000 network physicians who signed new contracts to participate and agreed to accept discounted rates in exchange for more patient volume.
Dr. Mark Kogan, a San Pablo gastroenterologist, is one of the physicians who used the law of supply and demand to make the case for higher rates.
Along with 18 colleagues at Northern California Gastroenterology Consultants, he already sees plenty of patients. So when Blue Shield last year offered the group more business from new Covered California enrollees -- but at 30 percent less -- the group declined.
"We basically told them, 'We cannot do that,' " Kogan recalled. "We would lose money by seeing those patients."
That put Blue Shield in a bind. Without access to those 19 gastroenterologists who work out of seven East Bay offices, where would its subscribers go?
By mid-January, Blue Shield backed down and agreed to pay the group of specialists its current rates if the doctors would take on the insurer's exchange patients.
The issue of discounted fees surfaced at Thursday's Covered California board meeting after Kim Griffin, chairwoman of Medical Office Managers of the Peninsula, told the board in a letter that because some insurers are discounting fees for exchange customers, "many of us have opted out."
That doesn't surprise Thorp and Kogan, who say there is a misconception among the public that access to more patients means more money.
"If you are pricing a service for less than it costs you to provide it," Thorp said, "you cannot make that up in volume."