Narrow Provider Networks in New Health Plans: Balancing Affordability with Access to Quality Care

By Sabrina Corlette, JoAnn Volk, Robert Berenson and Judy Feder
Urban Institute, Georgetown University Center on Health Insurance Reforms, May 2014

New network configurations offer trade-offs for consumers. Many insurers were able to lower their overall costs by reducing the prices they pay participating providers, which in turn allowed them to lower their premiums to attract price-conscious shoppers. However, in many cases, consumers have been surprised to discover that their new plan offers a more limited choice of providers. Some others willing to pay more to purchase a plan with broader access to providers have found that only limited-network plans are available in their area.

It is not yet clear whether these new, narrower network plans can effectively deliver on the benefits promised under the plan. If policyholders opt to seek medically necessary care out-of-network, it could expose them to significant financial liabilities. If policyholders delay or forgo care because in-network providers can’t meet their needs, it could put their health at risk.

Consequently, state and federal policy-makers are taking another look at the Affordable Care Act (ACA) requirement that plans participating on the new health insurance marketplaces maintain an adequate provider network. In doing so, they must strike a delicate balance. If they overly constrain insurers’ ability to negotiate with providers, consumers could face significant premium increases. On the other hand, consumers must be able to choose among plans with confidence that they have a sufficient network to deliver the benefits promised and that they will not be exposed to unanticipated health and financial risks because of an inadequate network. Insurers also need incentives to take provider quality into account (in addition to prices).

Conclusion

There is no perfect approach to the oversight of health plan networks. In the absence of other government policies to constrain provider prices, insurers’ ability to exclude or threaten to exclude providers from the network is important to their ability to negotiate reimbursement rates and offer more affordable premiums to consumers. On the other hand, if insurers narrow their networks too much, consumers could be harmed if forced to go out-of- network or to a less-preferred provider tier to meet their needs. Policy-makers therefore need to strike a balance between consumer protection and insurer flexibility.

Our proposed approach sets minimum quantitative standards, with waivers for certain providers based on price and quality; improves transparency and consumer information to give consumers better tools to make informed choices; gives insurers the flexibility to develop more value-oriented network designs so long as they maintain a provider network that can meet people’s needs; and — to assure effective consumer protection — calls for continuous monitoring of consumers’ use of out-of-network services, complaints and appeals, and more active oversight of plan behavior.

Full report (10 pages): http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2014/rwjf413643

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Comment:

By Don McCanne, MD

This report provides an excellent discussion of the tradeoffs between affordability and access to care when insurers use networks of providers, especially the trendy narrow networks in many of the ACA exchange plans. Unfortunately, the authors’ approach to trying to achieve an optimal balance misses an opportunity both to totally avoid the impaired access characteristic of narrow networks, and to make health care even more affordable.

The flaw is that they assume that private health plans are a given. With that, they then try to achieve a compromise between avoiding excessively reduced access to providers and reducing insurance premiums by restricting patients to providers who agree to lower contracted rates. A single payer system would have full choice of providers and would be more affordable because of the efficiencies of a government administered program, including its power as a monopsony. Compared to single payer, patients enrolled in narrow network plans have less choice of providers and pay more. They lose on both counts.

Even broader networks found in the majority of private plans still compromise between these choices, though not to as great of a degree. But they still do compromise.

The remedial proposals in this report are designed to support the superfluous private insurer intermediaries, while compromising access and cost for patients. Our health care system should be about patients, not insurers.

It is not as if the authors of the report do not understand this. They write, “In the absence of other government policies to constrain provider prices…” If they are going to change policy, why don’t they move to policies that actually benefit patients? Like a single payer national health program – full access to all health care professionals and institutions, in an equitably funded system that all of us can afford.

Narrow Provider Networks in New Health Plans: Balancing Affordability with Access to Quality Care

By Sabrina Corlette, JoAnn Volk, Robert Berenson and Judy Feder
Urban Institute, Georgetown University Center on Health Insurance Reforms, May 2014

New network configurations offer trade-offs for consumers. Many insurers were able to lower their overall costs by reducing the prices they pay participating providers, which in turn allowed them to lower their premiums to attract price-conscious shoppers. However, in many cases, consumers have been surprised to discover that their new plan offers a more limited choice of providers. Some others willing to pay more to purchase a plan with broader access to providers have found that only limited-network plans are available in their area.

It is not yet clear whether these new, narrower network plans can effectively deliver on the benefits promised under the plan. If policyholders opt to seek medically necessary care out-of-network, it could expose them to significant financial liabilities. If policyholders delay or forgo care because in-network providers can’t meet their needs, it could put their health at risk.

Consequently, state and federal policy-makers are taking another look at the Affordable Care Act (ACA) requirement that plans participating on the new health insurance marketplaces maintain an adequate provider network. In doing so, they must strike a delicate balance. If they overly constrain insurers’ ability to negotiate with providers, consumers could face significant premium increases. On the other hand, consumers must be able to choose among plans with confidence that they have a sufficient network to deliver the benefits promised and that they will not be exposed to unanticipated health and financial risks because of an inadequate network. Insurers also need incentives to take provider quality into account (in addition to prices).

Conclusion

There is no perfect approach to the oversight of health plan networks. In the absence of other government policies to constrain provider prices, insurers’ ability to exclude or threaten to exclude providers from the network is important to their ability to negotiate reimbursement rates and offer more affordable premiums to consumers. On the other hand, if insurers narrow their networks too much, consumers could be harmed if forced to go out-of- network or to a less-preferred provider tier to meet their needs. Policy-makers therefore need to strike a balance between consumer protection and insurer flexibility.

Our proposed approach sets minimum quantitative standards, with waivers for certain providers based on price and quality; improves transparency and consumer information to give consumers better tools to make informed choices; gives insurers the flexibility to develop more value-oriented network designs so long as they maintain a provider network that can meet people’s needs; and — to assure effective consumer protection — calls for continuous monitoring of consumers’ use of out-of-network services, complaints and appeals, and more active oversight of plan behavior.

Full report (10 pages):http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2014/rwjf413643

This report provides an excellent discussion of the tradeoffs between affordability and access to care when insurers use networks of providers, especially the trendy narrow networks in many of the ACA exchange plans. Unfortunately, the authors’ approach to trying to achieve an optimal balance misses an opportunity both to totally avoid the impaired access characteristic of narrow networks, and to make health care even more affordable.

The flaw is that they assume that private health plans are a given. With that, they then try to achieve a compromise between avoiding excessively reduced access to providers and reducing insurance premiums by restricting patients to providers who agree to lower contracted rates. A single payer system would have full choice of providers and would be more affordable because of the efficiencies of a government administered program, including its power as a monopsony. Compared to single payer, patients enrolled in narrow network plans have less choice of providers and pay more. They lose on both counts.

Even broader networks found in the majority of private plans still compromise between these choices, though not to as great of a degree. But they still do compromise.

The remedial proposals in this report are designed to support the superfluous private insurer intermediaries, while compromising access and cost for patients. Our health care system should be about patients, not insurers.

It is not as if the authors of the report do not understand this. They write, “In the absence of other government policies to constrain provider prices…” If they are going to change policy, why don’t they move to policies that actually benefit patients? Like a single payer national health program – full access to all health care professionals and institutions, in an equitably funded system that all of us can afford.