Dec. 13, 2013 7:29 p.m. ET
Joy Houng is shopping for health insurance for next year. Her biggest priority right now is to find a plan that covers her monthly visits to specialists at Cedars-Sinai Medical Center in Los Angeles.
So far, she has found one plan that includes Cedars-Sinai—but it doesn't cover other services that she needs. "I want to be treated by the same doctors I've been seeing for years," said Ms. Houng, a 27-year-old project manager in Sherman Oaks, Calif., who is being treated for chronic pain. Her current policy with Blue Shield of California will expire in March because it doesn't meet all of the 2010 health-care law's requirements for benefits offered. "The thought of losing all these people is absolutely terrifying," she said.
Many plans being offered now on the new insurance exchanges sharply limit the number of hospitals where services are covered, according to a new McKinsey & Co. report. Insurers are making a bet that price is more important to consumers than choice, and limiting the number of hospitals and doctors allows them to keep the cost of a plan as low as possible. Many of the new plans offered still are more expensive than current plans because they offer more benefits.
About 20 million people are expected to buy coverage on the federal and state-run exchanges by 2016. "This is the grand experiment," said J. Mario Molina, chief executive of Molina Healthcare Inc., which sells insurance on exchanges in nine states. "We're going to find out what consumers value more, choice or price."
According to the McKinsey report, which looked at federal and state-run insurance exchanges in 20 cities including Los Angeles, Atlanta and Houston, about 60% of health plans offer coverage at a smaller number of hospitals than comparable current individual plans. McKinsey identified 120 health plans in those markets by examining federal and state exchange filings, as well as provider information listed on individual insurer and hospital websites. Some of these new plans limit coverage to one or two large hospitals.
The number of hospitals accepting insurance from a consumer who buys coverage on the exchange could be 60% lower than the number of hospitals in current individual plans, according to the McKinsey report, which included the 20 largest hospitals in each market that it measured.
Consumers can still buy plans on the exchanges that offer coverage at a wide network of hospitals, but they cost significantly more, McKinsey said. In a market where the same insurer offers two separate plans—one with broad hospital access, one with limited options—the more comprehensive coverage costs 26% more, McKinsey said.
Paul Mango, a McKinsey director, said the plans give consumers more choice. "As the choice of products with different networks proliferates and is reflected in the premium, it will encourage the consumer to more consciously evaluate how much it is worth to gain access to certain hospitals," he said. McKinsey found that nearly two-thirds of about 150,000 consumers surveyed since 2011 said they were willing to trade provider choice to lower their premium costs.
The limits don't bother all the consumers on the exchanges. The large number who have been uninsured take a more positive view. "I'm not sitting here hoping that I can go to this hospital or that hospital. I'll just go to wherever is the local one," said Jeffrey Ainis, a 59-year-old, self-employed graphic designer from Alhambra, Calif., who has been uninsured since 2001.
Leading research and teaching hospitals, such as Cedars-Sinai, the University of Chicago Medical Center and MD Anderson Cancer Center in Houston, are cut out of most plans sold in their home states. That move "is built on the premise that hospitals are commodities," said Thomas M. Priselac, CEO of Cedars-Sinai Health System, which is available on just one of seven middle-tier plans sold in Los Angeles. "That's just not true."
In Los Angeles, two top research hospitals, Cedars-Sinai and Ronald Reagan UCLA Medical Center, are excluded from most of the area's plans sold on the state-run exchange, Covered California. Just one of seven middle-tier plans, for instance, features a broad-access, preferred-provider organization design. They range in price from $244 to $302 a month, for a 40-year-old nonsmoker.
Consumers who need complex procedures like heart transplants will still be able to get them because their insurers will contract with hospitals that offer them.
Still, "when you need an organ transplant, it's a matter of life or death—do you want your insurance company calling us, working out a deal?" asked David T. Feinberg, CEO of the UCLA Hospital system, which includes Ronald Reagan. The hospital is included in just two of seven middle-tier health plans sold in the Los Angeles market.
Long Beach Memorial Medical Center, which has three hospitals, took "significantly" lower rates with three insurers to remain as an option for people buying coverage on the exchange, said CEO Diana Hendel. Long Beach is counting on a surge in patient volume to compensate for a drop in payments, she said.
"It's a leap of faith," said Ms. Hendel.
Write to Timothy W. Martin at timothy.martin@wsj.com
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