Skip to content

Narrow Networks Can Limit Patient Choice, but Are They Affecting Provider Behavior?

There’s no question that the Affordable Care Act has been transformative for the health care industry.

For health care providers, new forms of health insurance available through the exchanges are changing things. Specifically, narrow networks, offered by many of the exchange’s health plans, are increasing pressure on providers to reduce costs and provide high-quality care.

In last week’s “Road to Reform,” we examined what two states were doing to address consumers’ concerns about limited provider networks. This week, “Road to Reform” looks at how narrow networks are affecting the behavior of providers themselves.

How Consumer Choice Is Putting Pressure on Providers

At the 2014 Digital Health Conference in New York City, keynote speaker Ezekiel Emanuel noted that during the first open enrollment period about 85% of exchange enrollees selected either a bronze or silver tier plan. More recent data indicate the trend is continuing in the second open enrollment period. According to Emanuel, that “shows that when people are spending their own money, even with subsidies, and choosing a health insurance product for themselves, that premium is a primary determinant of their choices.”

What that means for providers, specifically, is that they have to figure out a way to be included in the networks of the ACA’s silver and bronze plans. Emanuel noted that “Willie Sutton, the famous bank robber, said, when asked why he robbed banks, ‘That’s where the money is.’ So the question is, ‘Where is the money in health care?'”

A number of high-profile hospitals — such as Cedars-Sinai Medical Center in Los Angeles and Seattle Children’s Hospital — sought to ensure they were included in exchange plans’ networks, Emanuel noted. Further, he said he believes that the narrow-network plans featured in the exchanges will “set the standard across the industry” and start showing up more frequently in employer-sponsored coverage and in private exchange offerings. 

That could mean major changes for the way hospitals and physician groups run their businesses. Emanuel argued that the question for providers will become, “‘How you can you demonstrate you have higher quality, lower cost to get into the silver tier?’ And to get people to select you and be loyal to you?”

Providers Dealt With Narrow Networks Even Before the ACA

Although there is plenty of data to indicate that prevalence of narrow networks came about well before the ACA took effect, the exchanges seem to be rife with limited-access plans and the law certainly contributed to their continuing popularity among insurers. With the ACA prohibiting insurers from discriminating against people with pre-existing conditions and limiting insurers from setting premiums based on an applicants’ age, restraining networks became the best way to control costs, and thus limit premiums. And as Dan Mendelson, CEO and founder of Avalere Health, notes, insurers are offering such plans “because that’s what enrollees want, because people want lower premiums.”

Nearly all of the attention surrounding narrow networks tended to be on how patients would experience them, particularly on whether they would be angry about not having access to their doctors or hospitals. Even as concerns about narrow networks continued into the second open enrollment period, the focus remained on the effect on enrollees rather than providers.

Although some researchers have examined how narrow networks affect providers — McKinsey, for example, looked at “[w]inning strategies for participating in narrow-network exchange offerings” — several experts and health policy research groups told California Healthline the issue wasn’t on their radar yet.

What’s the Future for Providers and Narrow Networks?

Narrow-network plans still make up a relatively small portion of the market, and it might be too soon to tell the specific effects on providers.  

According to Mendelson, although narrow network plans make up the fastest-growing portion of the individual market, they represent a “tiny” portion of the overall market. Further, such plans are being featured across all tiers of exchange coverage, not just in the bronze and silver plans, he pointed out.

There may also be a reason why many high-profile providers have been left out of certain plans’ networks. Mendelson noted that “the premier cancer centers — like Sloan Kettering — are virtually all excluded from these networks.” He said such providers are costly and so high profile that if insurers were to include them in their networks, they “would run the risk of attracting a high number of people with cancer” to their plans.

Mendelson also said the focus should be less on the networks and more on other facets of the plans. “Payers and providers are putting together all sorts of novel relationships,” he said, adding, “However, it’s more about pay for quality than it is about narrow networks. There’s a lot of contracting change going on, but it’s more about quality, and making sure people aren’t getting readmitted.”

At the same time, research indicates that the trend of narrow networks is not likely to end anytime soon. According to a McKinsey analysis, narrow network plans made up 48% of all exchange plans in 2014. Further, the Robert Wood Johnson Foundation last fall found that insurers were expected to further limit networks in their 2015 exchange offerings. With exchange enrollment meeting or exceeding federal officials’ goals, experts see no reason why that trend won’t continue.

Too Soon To Tell?

For his part, Emanuel acknowledged that it might be too early to truly tell the effects of narrow networks on providers.

One thing Mendelson pointed out might be indicative of what’s to come. When asked about the effect on providers of these types of plans, he said, “It probably doesn’t matter much now that they’re excluded.” That “now” could be significant. When pressed, he acknowledged that it is tough to predict the future.

Around the nation

Here’s a look at other stories making news on the road to reform.

The ACA’s tax ‘headache.’ The Washington Post‘s “Wonkblog” examines how this year’s tax season could become a problem for ACA supporters.

Fine for me, thanks. Many U.S. residents are deciding to forgo health care coverage and instead face fines under the ACA’s individual mandate. Indiana’s looks at how many people will do so and some of their reasons.

Success means failure. The not-for-profit cooperative insurer CoOpportunity Health was a great success, enrolling more than 120,000 consumers in Iowa and Nebraska. However, with these enrollees came higher-than-anticipated medical costs, which ultimately led to the insurer calling it quits

Related Topics

Health Industry Insurance Road to Reform The Health Law