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Sutter Health and Blue Shield of California are in a Major Contract Dispute -- What Does it Mean to You?

The Dispute.

##### See The note at the end of this post for the current status of the Sutter Health - Blue Shield of California Dispute. #####

The contract between Sutter Health, a major hospital operator and health provider, and Blue Shield of California, one of the largest health insurance providers in California, expired on December 31, 2014, and the parties have not been able to agree on an extension. Not surprisingly, each side blames the other for the impasse. In general, Sutter Health accuses Blue Shield of trying to reduce payments to its doctors and hospitals by an excessive amount, perhaps adversely effecting patient care. Blue Shield claims that Sutter Health prices are excessively high, especially in the Northern California market where Sutter Health is a very significant market force. In addition, Blue Shield is resisting a Sutter Health demand that all disputes with patients and contracting parties (such as employers) be resolved by arbitration rather than in open court.

Blue Shield has already sent out notices of the contract termination to 139,000 of its insureds who are effected by the termination and will be sending out notices to an additional 140,500 insureds in a few days.

The parties continue to negotiate with each other, and it is possible that an agreement will eventually be reached that resolves the problem.

Transition Plan For Existing Insureds. 

If the parties are unable to resolve their differences, persons insured by Blue Shield of California will no longer be permitted to use Sutter Health physicians or hospital facilities, except to the extent permitted by their plan on an out-of-network basis. To blunt the effect of this change on California consumers, the California State insurance regulator has imposed a transition plan on the parties that gives consumers a limited amount of time to make adjustments. Basically, Blue Shield of California insureds who use providers (doctors or hospitals) in the Sutter Health network will have until April 1 or June 30 (depending on the type of plan) to choose a new provider within the remaining Blue Shield of California network. Alternatively, if permitted by their particular plan, customers could continue to use Sutter Health doctors or hospital facilities, but would have to pay the higher out-of-network co-pays. In general, consumers who opted for Blue Shield of California insurance in the expectation that they would be able to access Sutter Health doctors and hospitals are out of luck. They will have to find other health providers that remain within the Blue Shield network or pay higher out-of-network co-pays. 

If you have Blue Shield of California health insurance through your employer and use Sutter Health facilities, check with your benefits or human resources departments. They may have additional information or options for you.

Options For Those Who Have Not Yet Obtained Insurance for 2015.

Normally, if you have not yet obtained health insurance for 2015, I'd say "shame on you," and urge you to get cracking. See my recent blog post alerting you that you must be insured by February 15, 2015 in order to avoid paying tax penalties under the Affordable Care Act (ObamaCare). However, if you happen to prefer the doctors and hospitals in the Sutter Health provider network, your tardiness my have worked to your benefit this time. You can act now, find a health insurance provider that incorporates the Sutter Health provider network -- avoiding Blue Shield of California -- and get access to the doctors and hospitals that you prefer. But you do not have much time left. You must be enrolled by February 15, 2015.

Covered California Options. Blue Shield of California offers a number of insurance plans through Covered California (the California health care exchange operating under the Affordable Care Act) that include most Sutter Health doctors and hospitals. However, there are two other limited Covered California options which will allow you access to at least certain Sutter Health physicians and hospitals. Anthem Blue Cross offers the Anthem Blue Cross Pathway PPO individual and family plan which includes Sutter North Medical Group Doctors and Sutter Surgical Hospital-North Valley. This plan also includes the following hospitals: Alta Bates Summit Medical Center, California Pacific Medical Center (including the St. Luke's campus), Memorial Hospital Los Banos, Novato Community Hospital, Sutter Lakeside Hospital, Sutter Amador Hospital, and Sutter Coast Hospital. In addition, Chinese Community Health Plan's individual and family HMO includes the following Sutter Health facilities and medical groups: Physician Foundation Medical Associates, California Pacific Medical Center (including the St. Luke's campus) and Mills-Peninsula Health Services. As those of you who follow this blog know, the advantage of purchasing insurance through Covered California is that it is the only way to obtain the payment assistance/subsidies for health care costs available under the Affordable Care Act.

Non-Covered California Options. Sutter Health physicians and hospitals can be accessed through a number of health insurance plans, including Health Net. However, you should note that not all plans provide access to all Sutter Health providers. 

Additional Sutter Health Hospitals. In addition to those hospitals listed above, Sutter operates the following hospitals: Eden Medical Center, Memorial Medical Center - Modesto, Menlo Park Surgical Hospital, Sutter Auburn Faith Hospital, Sutter Davis Hospital, Sutter Delta Medical Center, Sutter Lakeside Hospital, Sutter Maternity and Surgical Center - Santa Cruz, Sutter Medical Center - Sacramento, Sutter Roseville Medical Center, Sutter Santa Rose Regional Hospital, Sutter Solano Medical Center, and Sutter Tracy Community Hospital.
Sutter Health Medical Groups. The Sutter Medical Network includes the following medical foundations or physician groups: Palo Alto Medical Foundation, Sutter Pacific Medical Foundation, Sutter East Bay Medical Foundation, Sutter Gould Medical Foundation, Sutter Medical Foundation, Alta Bate Medical Group, Central Valley Medical Group, Brown and Toland Physicians, Mills-Peninsula Medical Group, Sutter Independent Physicians.

Final Thoughts. Unless the contract dispute between Sutter Health and Blue Shield of California is settled, if you are currently obtaining your health care through one of the Sutter Health hospitals or physician groups AND you are currently enrolled in a Blue Shield of California health insurance plan, you will shortly need to find a new physician/hospital that remains within the Blue Shield of California network. If you prefer to use the extensive Sutter Health network of physicians or hospitals AND are not currently enrolled in an insurance program, you have some insurance options available to you that secure the Sutter Health-sourced health care that you prefer. But you must act to obtain coverage by February 15. 

If you need assistance in assessing your health insurance options, please contact me. But do it soon!

Current status of the Sutter Health and Blue Shield of California dispute. As of Friday, January 30, 2015, the parties have resolved their dispute and agreed to extend their agreement for two years, or to the end of 2016. Although the terms of the agreement have not been made available to the public, some accomodation of costs and reimbursement rates has been accepted by the parties, and the issue of an expanded mandatory arbitration requirment has been tabled. All Blue Shield of California insureds will continue to have the same access to Sutter Health physicians and hospitals as before as before the dispute.

Alex Pfeifer
Pfeifer Insurance Brokers
650 762-8070
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