￼￼￼￼￼￼￼Health Plan Features: Implications of Narrow Networks and the Trade-Off between Price and Choice
By Laura Summer, M.P.H.
AcademyHealth, Research Insights
The use of narrow provider networks in health insurance plans is a cost containment strategy that has gained popularity of late. Network design features differ among plans, but insurers generally seek to offer lower premiums by limiting the group of providers available to plan enrollees. As interest in the use of narrow networks has increased, so have concerns about their effect on consumers’ choices, costs, and access to care. With the growth of narrow network plans, it is important to understand the effectiveness of existing and emerging network design strategies and the potential for policies to ensure consumer access to high-quality care.
This brief summarizes key points from an expert panel AcademyHealth convened in December 2014 to examine existing research on network design and use, to discuss the impact of narrow networks and tiered networks on consumers, to review policies and practices for ensuring that networks are adequate, and to identify areas for additional research. Research on the impact of narrow networks is limited, but early studies suggest that several factors affect whether narrow network strategies will succeed. These factors include the way networks are constructed, the characteristics of the broader market in which narrow network plans operate, and whether consumers have the knowledge and tools to make informed choices about coverage. Additional research is needed to help policymakers better understand how to define and develop enforceable standards to measure the adequacy of narrow networks. Research can also help identify the quality considerations to be incorporated into the network design process, the development of network adequacy standards, and the type of guidance that can help consumers understand plan differences when making choices among products.
Understanding narrow and tiered network strategies
In all cases, though, insurers’ primary goal in designing networks was to offer competitive pricing. Generally, quality was not a criterion for exclusion or inclusion in a network.
Discussants… questioned whether consumers have the knowledge and tools they need to make informed decisions about choosing narrow networks or choosing among tiers.
A particularly serious concern raised by participants is that consumers are not aware that they may be financially responsible when out-of-network providers participate in episodes of care.
Researchers noted that, in thinking about how to provide information to help consumers make choices, it is important to remember that consumers will only act on information that comes from a trusted source and that consumers generally do not view health plans as trusted sources for identifying better providers.
Impact of narrow and tiered networks
Another important research question is whether access to care will diminish for consumers who enroll in health insurance plans with narrow networks. At this point, information about access is very limited.
Greater use of primary care and reduced use of specialty care occurred. Savings were concentrated among consumers who could keep their primary care provider.
They suggested that, unless risk adjustment accounts for differences in patient mix and health status is employed and working well, the constructions of narrow networks could be used to discriminate against patients with complex conditions and greater needs. They also noted that questions about the effectiveness of risk adjustment remain unanswered.
Panelists agreed that measurement standards relating to the quality of network providers are desirable, but they acknowledged that more work is needed to develop and test quality standards and to encourage plans to make consistent use of such measures.
They also recognized that, in some cases, the level of available investment or resources might not be adequate to satisfy network requirements. For example, state Medicaid programs have developed some of the most stringent criteria regarding network adequacy, but having the regulations on the books has not guaranteed that enrollees have access to adequate networks.
Panelists suggested that more proactive monitoring of network adequacy is needed. They observed that current measures of network adequacy are weak and depend heavily on health plans’ self-reported data.
The AcademyHealth panel focused on the design and operation of narrow and tiered network plans and what early experience suggests about how the networks can become more effective. Participants acknowledged the importance of striking a balance between flexibility for insurers in designing networks while ensuring consumer access to high-quality care. They discussed the need for greater oversight of and better standards to measure network adequacy. Experts agreed that the long-term implications of narrow networks remain to be seen. In identifying areas for research on narrow networks, they emphasized that research should account for market factors, both in the study design and in interpreting the results. Given that the narrow network strategy relies on consumer behavior, a recurring theme was the need to educate and assist consumers in making informed choices. Panel participants emphasized the importance of considering quality as well as cost in the design, implementation, and evaluation of narrow network plans.
By Don McCanne, MD
This nine-page brief from AcademyHealth provides an excellent summary of the status of the policy science behind narrow provider networks in health insurance plans. Since health care reform is about the patient – at least it certainly should be – it is helpful to read this while continuing to ask yourself how this helps the patient. Patient advocates will discover the shocking truth.
The complex policies behind narrow provider networks were not designed for patients. They were designed for the private insurance companies. To remain viable in an open market, insurance premiums must remain affordable. Narrow provider networks are only one more tool to reduce the cost of health care in order to keep their premiums competitive. As this report indicates, insurers select their network providers based on the lowest prices that they can negotiate – not on quality.
What do patients get when the insurers are trading away the patients’ choices of their health care providers? Quality? No. The only advantage that the insurers can tout is that patients allegedly are paying less in premiums and cost sharing because of the lower rates that insurers were able to negotiate on their behalf. But think about that. The private insurers are an intrusion that are responsible for not only their own expensive administrative excesses but also for the profound and costly administrative burden that they place on the health care delivery system.
Since these administrative costs are far greater than the negotiated discounts they receive from the providers, the insurers are actually increasing costs for the patients. Further, if the private insurers were replaced by a single public program, pricing in health care would be a fair bargain for us collectively, negotiated by our own public stewards, and thus would be serving the best interests of patients.
Narrow networks are an insurance industry construct that have been designed to serve their own interests at a significant cost to patients in choice, quality and value. We need to replace the insurers and their despicable policies with our own single payer national health program – a system designed from the beginning to better serve patients.