Clover Health says network adequacy rules, provider consolidation inhibit entry into new markets

Clover Health wants CMS to level the playing field for new MA insurers going up against providers with market power. (Clover Health)

As a newcomer to the Medicare Advantage market, Clover Health has sought to differentiate itself using big data and machine learning to improve beneficiary health management.

But analytics can’t save the insurer from well-established program requirements around network adequacy coupled with health system consolidation that has left the tech-forward insurer boxed out of certain markets, according to Clover’s Chief Technology Officer Andrew Toy, who testified before the House Ways and Means Committee on Tuesday.

Instead, the insurer is asking the federal government to loosen requirements around the program to enhance competition.


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Toy testified that provider consolidation in some states allows health systems to leverage their market power to negotiate higher reimbursement rates.

“This means we either have to agree and make things very expensive for the folks in the plan in that area, or basically not agree and then we don’t have network sufficiency as per CMS rules,” Toy told lawmakers.

“So, this is a very difficult situation to be in,” he added. “This is often in cases when, like I said, a provider has a lot of leverage in a given market.”

RELATED: Clover Health co-founder to step down from his post

Clover, which lost $22 million last year, has historically sold plans exclusively in New Jersey. In December, the insurer announced plans to expand to Georgia, Texas and Pennsylvania.

But Clover wants some assistance from the Centers for Medicare & Medicaid Services (CMS) to expand its offerings across the country.

Toy urged Congress and CMS to consider developing a standardized contract for health systems that refuse to contract with MA plans “based on unreasonable financial demands.” Instead, Clover wants “everyone on Medicare to be treated equally,” Toy said, meaning hospitals that accept Medicare fee-for-service should accept Medicare Advantage plans as well.

“They shouldn’t be able to turn away Medicare Advantage people just because they chose a new plan that they might like which is innovative,” he said. “We’ll negotiate in good faith and prove we are doing that, but we want some balance.”

RELATED: CMS to release Medicare Advantage encounter data as part of new data-driven strategy

Toy argued the policy shift would lower the barrier of entry for new Medicare Advantage insurers that are pulled between providers negotiating high rates versus the need to acquire in-network providers to meet CMS’ network adequacy requirements.

Established insurers have a notably different dynamic with providers. Daphne Klausner, senior vice president of senior markets at Independence Blue Cross, which operates in Philadelphia, said the insurer has a “good relationship” with providers but acknowledged New Jersey “is a little more challenging.”

“I think what we’re seeing in our market is that our providers are being more collaborative with us transferring to value-based payments,” Klausner told lawmakers.

Medicare Plan Finder needs an update

One issue where there was widespread agreement among policy researchers and insurers was the need to update the Medicare Plan Finder.

The web-based platform operated by CMS “needs significant modernization,” according to Jack Hoadley, Ph.D., researcher professor emeritus at Georgetown University. Hoadley said more could be done to improve not just the user interface of the site, but to simplify the language and provide personalized cost analysis based on a beneficiary’s current health status and expected use of services.

“Right now, the tool just isn’t doing that well," Hoadley said. "And it’s not going to be that hard to fix it. We know how to do those kinds of things better, but we need some investment of time and resources.”

Toy added the Plan Finder in its current form is not able to keep up with new, innovative plans structure that diverges from the traditional Medicare coverage.

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