Looking to appeal to consumers with lower premium prices, some health insurers selling policies through the Patient Protection and Affordable Care Act health insurance exchanges have turned to narrow provider networks.
There's been a flurry of media attention, and industry experts have predicted the networks could have downsides for both providers and patients. Here are six key things to know about narrow provider networks.
1. Health insurers selling individual policies through the PPACA exchanges are turning to narrow networks as a way to compete on premiums by lowering their unit cost (what a health insurance company pays to a provider for services), according to a Health Affairs blog post by David Cusano, JD, a senior research fellow at Georgetown University's Health Policy Institute, and Amy Thomas, a research associate at GU's Health Policy Institute.
2. Insurers forming narrow networks generally take one of two approaches, according to Mr. Cusano and Ms. Thomas. They either include only low-price providers in their limited networks, or they give incentive payments to providers that meet certain quality metrics and help the insurer achieve the federally required medical loss ratio threshold of 80 percent.
3. It seems limited provider networks could succeed in reducing healthcare costs considerably. According to an analysis of network data from 120 unique 2014 individual exchange plans, the McKinsey Center for U.S. Health System Reform found products with broad hospital networks had premiums 26 percent higher than narrow-network products of the same carrier, product type, metal tier and rating area.
4. However, the rise of narrow networks in the individual insurance market could be bad news for hospitals. According to Moody's Investors Service, hospitals included in the networks face potentially decreased revenue by accepting lower payment rates than what they would receive from broader contracts, while those that are excluded risk losing market share.
5. Narrow networks could potentially prove harmful to consumers as well. According to a recent analysis conducted by Georgetown University researchers and released by the Robert Wood Johnson Foundation, narrow network health plan enrollees face a more limited choice of providers and could face significant financial issues if they seek medically necessary care out-of-network. Health insurers should be required to meet a minimum standard for adequate access to primary care, according to the report.
6. Legal battles over narrow networks are already in progress across the country. Seattle Children's Hospital — which is out-of-network for many of the new plans offered on Washington State's health benefit exchange — filed a lawsuit last year against the state's Office of Insurance Commissioner on the grounds that the state's approval of the narrow network plans doesn't meet requirements for adequate access to care. Meanwhile, Anthem Blue Cross and Blue Shield's narrow networks in New Hampshire, Maine and Missouri became the target of criticism for similar reasons, with some policymakers and excluded providers saying the narrow networks could limit access to care.
More Articles on Narrow Networks:
Moody's: Provider Network Expansion Would Benefit Safety-Net Hospitals
Kaiser Health Tracking Poll: Public Opinion on Narrow Networks Malleable
The Rise of Micro-Network Solutions