Dive Brief:

• Cigna and Jefferson Health have failed to reach a new contract agreement, taking the Philadelphia system out of network for the health insurer’s commercial members on Saturday.
• Cigna and Jefferson both blamed each other for the contract lapse, with Cigna arguing Jefferson was asking for unsustainably high rate hikes and Jefferson saying Cigna’s current rates don’t reflect the cost of delivering care.
• The two companies said they are continuing negotiations and hope to reach an agreement. Absent a new contract, people with employer-sponsored insurance through Cigna may be on the hook for higher rates at Jefferson facilities, while the health system may lose out on revenue from those patients seeking out other sites of care.

Dive Insight:

Jefferson operates more than two dozen hospitals and a network of medical practices and outpatient facilities in the greater Philadelphia and South Jersey areas. The health system has been in network with Cigna for more than 20 years. But Jefferson can no longer operate at the low level of payment Cigna provides, according to the provider.

Cigna’s reimbursement rates have increased approximately 3% since 2020, while the hospital wage index — a government marker of hospital wage levels in the U.S. — has risen 20%, Jefferson said.

“Over the past five years, inflationary pressures have significantly increased the cost of healthcare related to labor medical supplies and operations. Cigna’s reimbursement rates for commercial members have failed to keep pace with these economic realities,” Edmund Pribitkin, Jefferson’s chief physician executive, said in a video on the system’s website.

But according to Cigna, “Jefferson Health chose to leave our network due to their unreasonable rate hike demands that would raise health costs for the people we serve,” a spokesperson for the insurer said over email.

“Almost all our employer clients’ benefits plans are self-funded, which means any increase in the cost of care is paid directly by local employers, their employees and their families,” they added.

The spokesperson did not answer a question on how many Cigna members would be affected by Jefferson Health going out of network. Nationally, the insurer covers almost 19.2 million people, mostly in commercial arrangements.

Cigna and Jefferson said they’re continuing to negotiate a new contract. In the meantime, emergency care remains in-network for Cigna members, and some Cigna members may qualify for programs to maintain in-network benefits, according to Jefferson Health.

The Cigna spokesperson added that customer service workers are available to direct patients to other in-network care options.

Contract negotiations between insurers and providers are increasingly spilling out into the open as insurers try to control snowballing medical spending and providers say they’re not being paid enough given the rising cost of providing medical care.

Taking contract spats public is a negotiating tactic for systems, which bank that patients — concerned about losing access to their local medical facilities — will complain to their insurance carrier and hopefully pressure it to increase rates. In his recorded video statement, Pribitkin urged Cigna members and employer clients to lobby the payer to keep Jefferson in-network.

Health systems also have new ammunition in contract negotiations due to increased price transparency, which gives providers a clearer picture of their reimbursement relative to peers.

Public contract disputes have a variety of outcomes. Last month, Cigna negotiated a new contract with another Philadelphia-area system, Main Line Health, just before their agreement was set to expire.

However, in some cases patients been out of network with local hospitals and doctor’s offices for weeks before a new contract is agreed upon. And occasionally, systems elect to remain out-of-network. Recently, several Midwest systems have elected to no longer accept Medicare Advantage plans over low reimbursement rates and high levels of care denials.

Another outcome is a short extension of existing rates as negotiations continue. Earlier this month, UW Health and an Elevance subsidiary in Wisconsin extended their contract, which was set to expire mid-April, until July 1 to give them more time to reach a solution without kicking patients out of network.