More than a dozen insurers offer plans on the New York health insurance marketplace, and depending on where they live, shoppers may have more than a hundred products to choose from. But despite being spoiled for choice in many ways, there’s one popular feature that most New Yorkers can’t find in any of the health plans offered on their state exchange: out-of-network coverage.

Except for offerings by a few insurers in far western New York and the Albany area, the only options available elsewhere in the state, including the entire New York City metro area, are health maintenance organization-style plans that cover care provided only by doctors and hospitals in the plan’s network. People who go out of network for anything other than emergency care are generally going to be responsible for the entire bill.

Although New York may not be the only place where HMOs are the sole marketplace option for many consumers, it’s an unusual situation. According to figures from McKinsey & Co., in 2015 just 1 percent of people who were eligible to shop for coverage on the exchanges across the United States had only HMOs to choose from. Four percent could choose either HMOs or EPOs,  the acronym for exclusive provider organizations that, like HMOs, don’t generally provide non-emergency out-of-network coverage.

New York officials didn’t respond to requests for comment.

Experts point to a number of factors that contributed to the New York marketplace’s dearth of plans such as preferred provider organizations that typically have some coverage for  out-of-network doctors and hospitals. In those plans, consumers generally have to pay more out of pocket than they do for in-network care, because deductibles and co-insurance charges are higher.

Some experts say New York’s difficult history in the individual insurance market — which includes people who don’t buy coverage through work — is a key reason insurers are wary of offering products with out-of-network benefits.

In 1992, a new state law required insurers on the individual market to cover anyone seeking a plan, regardless of their health. (A handful of other states also had similar requirements long before the health law made this mandatory for all states in 2014.) A few years later, the state required that two standardized HMO plans be offered in the individual market, only one of which offered out-of-network benefits, says Peter Newell, director of the health insurance project at the United Hospital Fund of New York, a research and philanthropic organization.

But it was difficult to maintain a customer base that wasn’t too costly for the insurers to cover since healthy people were not required to buy insurance. “That out-of-network product attracted a lot of high users of medical care, and prices went through the roof,” says Newell. Many insurers left the individual market at that time, and because of the high costs, enrollment on the individual market plummeted from more than 100,000 in 2000 to under 20,000 in 2012, according to a 2012 study by Health Management Associates for the New York Department of Health.

Following that experience, “insurers are a little gun shy” about offering plans with out-of-network coverage on the exchange, says Newell.

Health law requirements also give insurers pause, say experts. Obamacare requires insurers that sell plans on the individual and small group markets to cover a comprehensive set of essential health benefits.

“It’s a very broad, comprehensive package of benefits,” says Leslie Moran, senior vice president at the New York Health Plan Association, a trade group. “There were concerns about being able to maintain an affordable product. You’d attract only very expensive patients, and the ability to price it moving forward was a concern.”

While that could be a concern in every state, in New York another requirement has likely discouraged insurers from offering PPO-type plans, says Sabrina Corlette, project director at Georgetown University’s Center on Health Insurance Reforms, who has co-authored reports about state efforts to implement the health law.

In New York, the exchange required that any insurer that sold plans with out-of-network benefits outside the marketplace had to also sell plans with out-of-network benefits inside the marketplace.

Rather than offering PPOs both on and off the exchange, most insurers opted not to sell PPOs at all. “They were worried about adverse selection, so they only offered HMO-style plans,” Corlette says.

Having access to out-of-network benefits is generally high on consumers’ wish list, but it can be a double-edged sword, say consumer advocates. When beneficiaries go outside the network, even if the plan pays some of the bill, the doctor or hospital can refuse to accept the insurer’s rate and, depending on the state, may demand that the consumer pay the balance.

“It’s not much of a consumer protection because they can be balance billed,” says Lynn Quincy, associate director for health policy at Consumers Union, referring to that practice.

Last year New York passed a law that aims to protect consumers from surprise out-of-network bills. Among the provisions is one that beefs up the adequacy standards for plans’ networks, so consumers will be less likely to need out-of-network care in the first place.

“I’m OK with consumers being offered a plan that’s in-network only as long as the network is robust,” says Quincy.

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Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

MOUNT VERNON, Texas—Despite residents’ concerns and a continuing need for services, the 25-bed hospital that served this small East Texas town for more than 25 years closed its doors at the end of 2014, joining the ranks of dozens of other small rural hospitals that have been unable to weather the punishment of a changing national health care environment.

For the high percentages of elderly and uninsured patients who live in rural areas, closures mean longer trips for treatment and uncertainty during times of crisis. “I came to the emergency room when I had panic attacks,” said George Taylor, 60, a retired federal government employee. “It was very soothing and the staff was great. I can’t imagine Mount Vernon without a hospital.”

The Kansas-based National Rural Health Association, which represents around 2,000 small hospitals throughout the country and other rural care providers, says that 48 rural hospitals have closed since 2010, the majority in Southern states, and 283 others are in trouble. In Texas along, 10 have changed. 

“If there was one particular policy causing the trouble, it would be easy to understand,” said health economist Mark Holmes, from the University of North Carolina, whose rural health research program studies national trends in rural health care. “But there are a lot of things going on.”

Experts and practitioners cite declining federal reimbursements for hospitals under the Affordable Care Act as the principal reason for the recent closures. Besides cutting back on Medicare, the law reduced payments to hospitals for the uninsured, a decision based on the assumption that states would expand their Medicaid programs. However, almost two dozen states have refused to do so. In addition, other Medicare cuts caused by a budget disagreement in Congress have also hurt hospitals’ bottom lines.

But rural hospitals also suffer from multiple endemic disadvantages that drive down profit margins and make it virtually impossible to achieve economies of scale.

These include declining populations; disproportionate numbers of elderly and uninsured patients; the frequent need to pay doctors better than top dollar to get them to work in the hinterlands; the cost of expensive equipment that is necessary but frequently underused; the inability to provide lucrative specialty services and treatments; and an emphasis on emergency and urgent care, chronic money-losers.

‘Another Disaster’ 

Rural health care experts caution that national and state officials need to address the problems for rural hospitals or they could face a repeat of the catastrophic closings that followed changes in the Medicare payment system 30 years ago. That 1983 change, called the “prospective payment system,” established fixed reimbursements for care instead of payments based on a hospital’s reported costs. That change rewarded large, efficient providers, but 440 small hospitals closed before the system was adjusted in 1997 to help them. Those adjustments created the designation of critical access hospitals for some small, isolated facilities, which are exempted from the fixed payment system.

“And now, beginning in 2010, we’ve had another series of cuts that are all combining to create another expansion of closures just like we saw in the ‘90s,” said Brock Slabach, senior vice president of the Rural Health Association. “We don’t want to wake up with another disaster.”

The current surge in closures means federal officials need to come up with new legislation to halt the recent cuts to small hospitals in order to “buy time” to figure out how rural hospitals should effectively operate in the future, said the association’s chief lobbyist, Maggie Elehwany. “It is important to stop the bleeding right now.”

In Mount Vernon, a town of 2,678 people nestled in grassland and dairy country about two hours east of Dallas, family practitioner Jean Latortue has taken out a lease on the now-vacant hospital building to convert it into an outpatient and urgent care clinic at his own expense. Reopening may be a risky move, he acknowledged, but the need is there.

“The community went into panic mode,” he said. “I figured I had to step up.”

The non-profit ETMC Regional Healthcare System, based in Tyler, Texas, closed the Mount Vernon hospital and two others of its then-12 rural hospital affiliates because it could no longer sustain operating losses that had persisted for five years.

“There was no ill will,” Franklin County Judge Scott Lee said in an interview from his Mount Vernon office. “They were losing money. We had a good working relationship for years, and they had a business decision to make.”

Mount Vernon’s Issues 

Perry Henderson, senior vice president of affiliate hospitals for ETMC, a major health care provider in East Texas, noted that rural hospitals have many uninsured patients, and Medicare accounts for “60 to 70 percent of the business,” while in “Dallas or Houston it’s a fraction of that.”

Mount Vernon, with lakefront properties that are attractive to retirees, has its share of elderly patients. Henderson also noted that many rural hospitals also have to deal with large numbers of agricultural accidents. Farming, another Mount Vernon staple, is one of the country’s most dangerous occupations. Finally, he added, country roads bring large numbers of traffic accidents. When there’s no hospital, emergencies mean longer trips to get help.

Henderson and other experts cite three reasons for the rash of closures nationally. Sequestration, the across-the-board federal budget cut that arose out of the legislative impasse between the Obama administration and congressional Republicans, has resulted in a 2 percent reduction in Medicare reimbursements since 2013.

“If Medicare is 50 percent of your revenue and you lose two points,” North Carolina’s Holmes said, “it can be a killer.”

Rural hospitals took a second hit from the federal health law’s reductions in “disproportionate share hospital” payments to hospitals with large numbers of indigent and uninsured patients. Federal officials made the cuts assuming that the law would assure that more patients had insurance.

It hasn’t worked well in rural areas, the Rural Health Association’s Elehwany said, because annual deductibles for the new insurance plans, which come out of consumers’ pockets, “are running between $2,500 and $5,000,” and people can’t pay them.

And in communities such as Mount Vernon, this problem is exacerbated because Texas, along with 22 other states, has refused to expand Medicaid, a key provision of the Affordable Care Act.

“That’s a big deal,” ETMC’s Henderson said. “That’s when we had the hurt.”

Latortue, who came to Mount Vernon as an ETMC hospital doctor in 2008, appears undaunted by the challenges of reinventing the hospital, which was treating an average of eight inpatients a week when it closed. Still, he said, “I’m very busy, and patients need to be seen—we’ll be all right.”

He intends to provide both outpatient services, including lab work, at the new clinic, and emergency care, stabilizing patients until they can be transferred to the Titus Regional Medical Center in Mt. Pleasant, 16 miles away, or to a smaller facility in Winfield, eight miles away. He also plans a wellness clinic to treat obesity and will offer Botox and laser cosmetic services. A cardiologist and a gastroenterologist will make weekly visits, and he is also looking for an ob-gyn.

Latortue got a favorable lease from the town of Mount Vernon and inherited an X-ray machine and other equipment from ETMC, but he still took out $150,000 in loans for remodeling and needs another $60,000 to $70,000 for equipment.

Still, none of this will replace the hospital, and his patients know it. “I live right behind the building,” said Mary Hunter, a very fit grandmother of 73. “I’ve had very good health until my blood pressure spiked last week,” she said. “We retired in 2006 and moved here, partly because of the hospital. And now it’s gone.”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.