A proposal to remake the health insurance exchanges could open up a vast new market to emerging companies that sell health plans without provider networks.
Cash-pay startups and reference-based pricing companies such as Sidecar Health and Imagine360 say they are ready to jump at the opportunity.
The Centers for Medicare and Medicaid Services issued a proposed rule last month that would enact major changes to how the health insurance exchanges from the Affordable Care Act of 2010 have operated for more than a decade. Promoting non-traditional offerings such as “non-network plans” and catastrophic policies is central to that plan.
“There’s a lot of energy and excitement around the proposal,” said Emily Porter, Sidecar Health’s chief public affairs officer. “There’s not been a lot of innovation in the exchange market since it began, and this provides an opportunity for there to be more creativity.”
Non-network plan carriers boast that their products cost less than traditional health insurance and provide consumers an alternative as premiums skyrocket.
These companies do not contract or negotiate rates with healthcare providers. Instead, they designate prices for services, usually based on a percentage of Medicare reimbursements or an average cash price. Members then seek out providers who will accept that amount or less. If the provider charges more, the patient pays the difference.
This model comes with pitfalls for members and providers, however, said Sabrina Corlette, co-director of the Georgetown University Center on Health Insurance Reforms. Patients could be subject to unexpected costs, while providers may endure more unpaid bills, she said.
For insurers, the proposal injects additional uncertainty into a market that has already endured unexpectedly high medical costs and the end of enhanced subsidies over the past year, Corlette said. “If I were in an insurer’s shoes, I’d be like, ‘How do we even begin to plan for something like this?’” she said.
This policy shift would be virtually unprecedented considering the ACA includes myriad rules related to provider networks.
Non-network plans have never been available on the individual exchanges. Security Health Plan — now a unit of Sioux Falls, South Dakota-based Sanford Health — offered 12 of them on the ACA’s Small Business Health Options Program in Wisconsin in 2016.
Sidecar Health applied to sell non-network individual exchange plans in Ohio in 2021 and 2022, but CMS denied the requests. The agency issued a regulation in 2024 explicitly barring non-network plans from the ACA marketplaces.
Sidecar Health has instead focused on the employee health benefits market with clients such as Koch, Porter said. Koch’s venture arm invested in the company in 2024.
Selling these plans alongside traditional insurance could trip up exchange customers, said Ellen Montz, a managing director at the consulting firm Manatt Health. Montz was director of CMS’ Center for Consumer Information and Insurance Oversight, which oversees the marketplaces, when it banned non-network plans.
“ACA consumers are very price sensitive, and I never felt comfortable with the fact that a consumer could really tell what they were buying if they buy one of these plans,” Montz said.
The proposed rule is silent on key details, including how non-network plans would be described on the exchanges and whether the companies would be required to clearly disclose the lack of provider networks.
CMS also did not spell out how it would ensure access to safety-net providers or how it would guarantee patients would not face out-of-pocket costs for preventive care as the law requires.
The draft regulation does state that non-network plans would be included in the exchanges’ risk-adjustment system.
Another consequence of adding non-network plans to the exchanges might be smaller premium subsidies for all customers, said Wes Sanders, founder and principal consultant at the health insurance consulting firm Evensun Health.
The value of the subsidies is partly based on premiums for the second-lowest-cost Silver plan in each geographic market. Because these non-network plans promise lower prices, they could earn that designation, Sander said. This dynamic also could lead to fewer traditional plans on the exchanges, he said.
“Consumers who have health conditions and want access to broader networks are losers here because there will be less incentive for insurers to offer those products,” Sanders said.
Additionally, because non-network plans do not contract with providers, they are not bound by the No Surprises Act, which protects patients from balance billing.
At reference-based pricing company Imagine360, providers accept 97% of the charges incurred by its 500,000 members, CEO Jeff Bak said. The company pays providers an average of 140% of Medicare rates and offers non-network health insurance to self-insured employers, such as the pest control company Rollins, he said.
“We work with facilities to defend what we reimburse, which is fair, and we take it from that point forward,” Bak said. “We ensure that [members] don’t do something like sign up for a repayment process with interest, which could be really damning. We also see if they qualify for financial assistance.”