Health plans that cut costs by limiting choices may be on the rise

By Chelsea Conaboy, Globe Staff

More state employees chose this spring to enroll in plans that limit which providers they can see. Among the 78,000 people who had to renew their coverage in April and May, the percent who chose limited network plans increased this year from 19 to 31.

Those plans, first offered by the Group Insurance Commission in April 2010, exclude some of the most popular but most expensive hospitals, such as those in the Partners HealthCare network. Enrollees were rewarded with lower annual costs and a three-month holiday on premium payments.

Those who switched saved between $600 and $1400, said Executive Director Dolores Mitchell.

All plans offered by her office are tiered, giving consumers the option to pay more out of pocket to see an expensive specialist or to get an MRI done at a more expensive hospital.

Both tiered and limited plans are designed to put pressure on high-cost providers to reduce their prices by limiting their patient pool. Popularity seems to be growing, as consumers and employers look for cheaper options, panelists who spoke this afternoon at a state hearing on controlling health costs said.

The representatives of employers, consumers and health plans said recent reports from the Patrick administration and Attorney General Martha Coakley citing wide variations in what hospitals are paid for similar care also are changing the landscape.

Mitchell’s office was an early adopter of tiered plans. Health care providers are rated based on the cost and quality of care they provide. To see providers with higher costs, patients must pay a higher copay.

“I think it’s an idea whose time has now finally come,” she said.

Employers have long been reluctant to use tiered plans in part because consumers pushed back on the idea that their plan could limit their ability to see a preferred doctor. Richard Lord, chief executive officer of Associated Industries of Massachusetts, said he expects to see more companies choosing them in the coming years.

“Employers are looking at alternatives,” Lord said. “I applaud Dolores for leading the way.”

But Amy Whitcomb Slemmer, executive director of consumer group Health Care For All, said there are some hazards in tiered plans.

For starters, it’s not clear how the tiers are defined and how providers are assigned to them. There is little consensus about how to measure the care that doctors provide or compare one physician to another. But, as they make choices about which providers to use based largely on cost, they need more information about what they will get for their money, she said.

Dr. Gary Gottlieb, chief executive of Partners HealthCare, said earlier today that he is worried about tiering because it is already “having an effect on consumer behavior.’’

“There is evidence that the market is already starting to work,” he said. “Our patients are telling us that tiers are a barrier’’ to them getting care from Partners providers.

Breaking the tie between hospital branding and public opinion about which hospitals provide the best care is difficult, the panelists said.

Michael Chernew, professor of health care policy at Harvard Medical School, said tiered plans allow the consumer to choose metaphorically between Advil and Walgreens brand ibuprofen.

“The role of government in that case is to provide information, to let you know that Advil and Walgreens are the same,” he said.