Narrow Health Plan Networks

A cost containment strategy for health plans making resurgence in recent years has been offering narrow provider networks which limit the doctors or hospitals accessible under the in-network benefits of the plan. Services obtained from doctors or hospitals outside of this limited network are considered to be out-of-network and subject to higher deductibles and co-insurance (with the exception of emergency services which must be covered the same as in-network).

The drivers behind offering narrows networks is the lower costs realized by excluding higher cost providers.  Savings amounts vary but are estimated to be in the range of 5 to 20%.  Narrow networks have been around for a number of years (most recently seen in the 1990’s) but have again become more commonplace today due to the escalating cost of healthcare.

The use of narrow networks is very prevalent in the plans offered through the State Exchanges under the Affordable Care Act.   Modern Healthcare reports that about 70% of plans offered through State Exchanges in 2014 included limited networks with premiums that were up to 17% less expensive that more inclusive broad networks.

Narrow networks have also been used in Accountable Care Organizations (ACOS).  ACO   providers receive financial rewards by offering care that meets certain quality and cost-saving targets. The smaller size of the network in an ACO arrangement makes it easier to manage a patient’s care. Narrow networks are also being included today in the group health plans offered by large employers.

One of the biggest challenges is assuring the health care consumer is fully aware of the limited nature of the in-network coverage offered by their choice of a narrow network plan.  The narrow network can be an excellent fit for a fully engaged educated consumer who has selected this particular plan with the objective of saving on health insurance costs while maintaining quality care.  Conversely, it can be a nightmare for an ill-informed consumer who can potentially incur significant expenses at much lower out-of-network reimbursement levels.

The Kaiser Family Foundation conducted a poll in February 2014 which found 51% of survey respondents would rather have a plan that costs more but allowed them to see a broader array of doctors and hospitals.  While 37% would rather have a plan that was less expensive with a more limited range of health care providers.  The survey also found that individuals who are either responsible for purchasing their own coverage or uninsured were more likely to select a less expensive narrow network health plan over a more costly broad network by a margin of 54% to 35%.

In summary, the acceptance of narrow network plans continues to be mixed.  These limited networks offer the opportunity for savings to insurers, employers and health plan members but also come with additional complexity for less savvy consumers of health care.

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About Rick Ewers

Mr. Ewers is an analytical consultant providing financial analysis, vendor evaluations, market & compliance analysis, as well as national industry trending for group employers.

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