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Premera Blue Cross and its subsidiary, LifeWise Health Plan of Washington, will include Seattle Children’s hospital and its specialists in its individual and small-group health insurance-plan networks for 2014 and 2015.

The moves put an end to the insurer’s part in a long-running legal dispute with widespread implications.

The issue — whether the state insurance office violated state and federal laws in approving plans that didn’t include Children’s — sparked a yearlong battle that pitted various insurers against a medical system whose patients include children with difficult, often deadly, conditions.

The insurers argued that the dispute was about cost. Children’s, they said, was simply too expensive, most of its services could be obtained elsewhere for less money, and insurers were obligated to keep a lid on premiums for new plans sold on Washington’s online exchange marketplace, Healthplanfinder.

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Children’s, on the other hand, insisted that the case was about access to care. It contended that without Children’s and its specialists, the insurers’ networks could not provide the vast majority of children’s services insurers are obligated to cover under the federal Affordable Care Act.

With Children’s out of the network, hundreds of parents of children with such serious conditions as cancer or heart problems were forced to pay more out of pocket or seek special arrangements from Premera for care at Children’s, the hospital argued.

It’s not clear whether the legal dispute, which was set to be heard in front of an administrative-law judge this week, will totally evaporate. Children’s case, which was brought as an appeal to the Office of the Insurance Commissioner’s (OIC) decision last year, also included BridgeSpan Health, an affiliate of Regence Blue Shield, and it was not clear at press time whether BridgeSpan also planned to settle with Children’s.

BridgeSpan was a much smaller player in the state exchange, but has submitted for review many additional plans for 2015. Those plans would be part of the offerings in the next enrollment period, which begins Nov. 15.

Premera and LifeWise, with what they termed their “value-based networks,” together claimed the majority of the 164,000 people who signed up for 2014 individual insurance coverage through the Washington Health Benefit Exchange.

Premera and Children’s said Sunday the in-network coverage for Premera and LifeWise members will begin Sept. 1.

Premera spokesman Eric Earling said Premera will not raise rates for current Premera or LifeWise plans for 2014 or rates filed and under review for 2015 plans.

Despite this latest agreement, the tension between cost and breadth of provider networks isn’t likely to vanish here or elsewhere. More large employers, attempting to get a grip on insurance costs, are offering plans with limited networks.

With the Affordable Care Act, insurers can no longer keep costs down by excluding sick people, and the law’s list of mandated benefits makes it more difficult to pare costs as well. Insurers are relying instead on negotiating good rates with medical systems or groups of providers willing to cut a deal, leaving others out of their networks.

This case, which began a year ago with different insurers, has had a tangled history, but the issues have remained constant.

Before Coordinated Care bowed out of the case earlier this year after agreeing to include Children’s in its network, Dr. Jay Fathi, its CEO, said Seattle Children’s was twice as expensive as other facilities on a cost-per-day basis.

“Paying those rates would unnecessarily drive up the overall cost of the product to consumers,” Fathi said in a declaration in the case.

Children’s, in its most recent briefs, argued that the opposite is true: Premiums for plans sold by Premera and BridgeSpan, it said, are generally higher than exchange plans whose networks include Children’s.

For patients, the difference between what they have to pay out of their own pockets for an out-of-network hospital and an in-network one can be huge.

Take a patient covered by the Premera silver exchange plan who runs up a $30,000 hospital bill. If the hospital was in Premera’s network, the patient would pay up to $6,530 out of his pocket. If that hospital was not in the plan’s network, however, the patient would be on the hook for $18,000.

Premera’s individual plans have no limits on out-of-pocket costs for non-network care, so patients could be exposed to much higher costs.

Children’s, which calls itself the “pre-eminent provider of pediatric specialty services in the Northwest,” hospitalized 10,500 children in 2012, according to its records — more than twice as many as all other nearby hospitals with pediatric services combined.

In about 900 cases this year, parents sought coverage for “unique services” at Children’s, Premera said. More than 80 percent of those were covered at in-network cost-sharing levels under a “benefit level exception process,” the insurer said. BridgeSpan said it created single-case agreements for the same purpose in fewer than five cases.

Children’s countered that parents of chronically ill children — which it says account for about 18 percent of all children in the state — should not have to jump through hoops to maintain continuity of care.

Children’s, in briefings for this week’s hearing, also argued that the OIC was blind to the possibility that Premera and BridgeSpan, by excluding its hospital and specialists, were knowingly pushing parents of chronically ill children, who often require expensive care, to other plans.

The OIC said its network adequacy review is sufficient to control for such “adverse selection.”

Sharpening the focus to Seattle Children’s, Premera recently sealed a contract for its 2015 plans with Swedish Medical Center, which also was excluded from its individual-plan networks this year, generating a significant number of complaints to Premera.

Because the case began last fall for 2014 plans, it involved OIC’s network-adequacy rules in place at the time. Since then, Insurance Commissioner Mike Kreidler has adopted new rules that spell out in more detail just what “adequate” means.

Like the old rules, however, they do not require an insurer to include a specific hospital or medical system in its network unless no others are nearby.

Carol M. Ostrom: or 206-464-2249. On Twitter @costrom

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