By Sandhya Somashekhar and Ariana Eunjung Cha for the The Washington Post Published: November 20

As Americans have begun shopping for health plans on the insurance exchanges, they are discovering that insurers are restricting their choice of doctors and hospitals in order to keep costs low, and that many of the plans exclude top-rated hospitals.

The Obama administration made it a priority to keep down the cost of insurance on the exchanges, the online marketplaces that are central to the Affordable Care Act. But one way that insurers have been able to offer lower rates is by creating networks that are far smaller than what most Americans are accustomed to.

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The decisions have provoked a backlash. In one closely watched case, Seattle Children’s Hospital has filed suit against Washington’s insurance commissioner after a number of insurers kept it out of their provider networks. “It is unprecedented in our market to have major insurance plans exclude Seattle Children’s,” said Sandy Melzer, senior vice president.

The result, some argue, is a two-tiered system of health care: Many of the people who buy health plans on the exchanges have fewer hospitals and doctors to choose from than those with coverage through their employers.

A number of the nation’s top hospitals — including the Mayo Clinic in Minnesota, Cedars-Sinai in Los Angeles, and children’s hospitals in Seattle, Houston and St. Louis — are cut out of most plans sold on the exchange.

In most cases, the decision was about the cost of care.

In Seattle, the region’s predominant insurer, Premera Blue Cross, decided not to include the children’s hospital as an in-network provider except in cases where the service sought cannot be obtained anywhere else. “Children’s non-unique services were too expensive given the goal of providing affordable coverage for consumers,” spokesman Eric Earl­ing said in an e-mail.

For example, a pediatric appendectomy at Children’s costs about $23,000, he said. At another community hospital, the cost is closer to $14,100. Melzer said his hospital often bills more than community hospitals for comparable procedures because the children it treats are often gravely ill, so even a routine tonsillectomy may be more complicated.

But as a result, families like Jeffrey Blank’s, which has relied on Seattle Children’s since his daughter, Zoe, received a diagnosis of a rare bone disorder, face difficult decisions. Under some of the new law’s health plans, the family would no longer be able to take Zoe to Children’s for her routine checkups, or it could count as an “out-of-network” visit, saddling the family with huge bills.

“It just stresses me,” said Blank, 53, a self-employed massage therapist who is sorting through his options but readily admits that his family has benefited from other parts of the health law. “I hope things continue wonderfully for my daughter and that she doesn’t need the level of care she got after her diagnosis, but there’s this unknown.”

In New Hampshire, Frisbie Memorial Hospital took legal action against an insurer that excluded it from its marketplace plans, and in Missouri, consumer advocates successfully lobbied an insurer to add a children’s hospital after it unveiled a plan that lacked one.

Experts say that routine care offered at cheaper, community-based hospitals is often comparable to that of pricey academic medical centers.

“Academic medical centers are valuable because they are the only place to get certain specific treatments, but they provide a lot of care that is routinely provided in community hospitals that do it very well at a cheaper cost,” said Paul B. Ginsburg, president of the Center for Studying Health System Change.

In some cases, the goal of lowering costs has prompted the opposite reaction: Providers themselves have balked at being in exchange networks because they are unhappy with the reimbursement rates or are concerned that the exchanges could be dominated by sick people who won’t be able to pay their portion of the bills.

The Cleveland Clinic said it decided to limit itself to plans on Ohio’s exchange that offered higher reimbursement rates and were backed by brand-name insurers.

Some advocates argue that these narrow networks are a fine way to cut costs. They note that the majority of people expected to buy coverage on the exchanges are uninsured, and that even a narrow network is better than nothing.

Insurers “looked at the people expected to go on the exchanges and thought: ‘These are people coming out of the ranks of the uninsured. They don’t care about the Mayo Clinic or the Cleveland Clinic. They will go to community providers,’ ” explained Robert Laszewski, a consultant to the health-care industry.

Insurers will typically cover out-of-network costs in an emergency. And most hospitals are included in at least one plan.

“I can’t find you a plan with all the major facilities, but if you give me a hospital I can find a plan participating in it,” said Elisabeth Benjamin, vice president of health initiatives for the Community Service Society of New York, one of the agencies helping consumers navigate their new health insurance options.

The Affordable Care Act requires insurers to provide enough doctors and hospitals to ensure quality care. But there is no detailed guidance from the federal government on what this means.

“It’s been mostly up to the plans to attest to it, and for now everyone’s taking their word for it,” said Karen Pollitz, a senior fellow at the Kaiser Family Foundation who focuses on health reform and insurance.

In New Hampshire, consumers who purchase insurance through the exchange have only one choice of carrier — Anthem BlueCross BlueShield— because no other insurer applied to join the exchange. The company’s network includes access to only 16 of the state’s 26 acute-care hospitals.

That’s forcing people such as Michael Justice, 63, a Web developer from Peterborough, N.H., to leave doctors they like. Justice has been treated by primary-care doctors, cardiologists, orthopedists and eye doctors affiliated with Monadnock Community Hospital in his town for 15 years, and his wife for 30 years. But starting in 2014, that medical center will no longer be in network for the Anthem plans sold in his state, whether he buys the insurance through the health exchange or on his own.

Justice said he and his wife could go with another insurer, which costs $1,600 a month for the couple outside the marketplace, and continue to see their providers. Or they could pay half that if they purchase through the exchange.

“We’re being forced to choose between one bad option and another bad option,” said Justice.

Anthem spokesman Chris Dugan said that consumers under the plan are seeing prices that are 25 percent lower than they would have been with a broader network, and that the company found in surveys of more than 50,000 consumers across the country that most people would chose cost savings over being able to see a particular doctor. He said that the network still covers 74 percent of all primary-care providers and 78 percent of specialists.

“This wasn’t something built overnight,” he said. “We took a very thoughtful approach to this.”

Jeffrey Blank is among the millions of Americans whose insurance policies are being canceled at the end of the year because they do not comply with the health law’s mandated basic benefits. President Obama has said that states and health plans may choose to extend these policies past Dec. 31, but Washington’s insurance commissioner has said he will not permit the extension.

Blank’s insurer, Premera, has suggested that he enroll in the new Premera plan on the marketplace. But Children’s is not in the new network.

So, Blank must make a choice. Should he take his insurer’s suggestion and lose access to Children’s? Should he go with one of the plans on the exchange that includes Children’s, even if that means picking an insurance company he has never heard of?

He is leaning toward a third option: buying a private plan with Premera outside the exchange with a broader network, but that would force him to give up the estimated $400-per-month subsidy he would be eligible for under the health law.

Blank faults the insurer and not the health law, which has already benefited his family, he said. Before its enactment, insurance companies routinely put a dollar cap on the amount of benefits a person could receive in a lifetime. Without the law, Zoe, 5, who received a diagnosis of a sometimes fatal condition called osteopetrosis, probably would have reached that cap before adulthood, her father said.

She received the diagnosis at 8 months, not early enough to prevent her improperly growing skull from crushing her optic nerves, rendering her blind. At a year old, she underwent a successful stem cell transplant. But she is still suffering some side effects of the transplant, and gets checkups at Children’s every two or three months.

Premera has said it will consider as in-network service “unique” treatments available only at Children’s. But the decisions about what is considered “unique” will be made on a case-by-case basis, Blank learned, and he has decided to reject that option, which is fraught with uncertainty.

“What if Zoe has to be hospitalized? What then?” Blank said. “I should have a plan that is in network, to be prepared. As wonderful as the Affordable Care Act has been for us, it’s like, how did this happen?”