Narrow Networks: One Size Doesn’t Fit All

The Affordable Care Act (ACA) established health insurance marketplaces in which insurers offered both broad and narrow network plans in order to provide a variety of options for beneficiaries. Narrow network plans provided lower premiums and allowed for better care coordination by ensuring stronger relationships between providers in a certain community or hospital group. Narrow network providers received lower reimbursement rates in return for anticipated increased volume through concentrated visits. In 2014, these narrow network plans accounted for 48% of all ACA plans offered in the marketplace.

A recent study compared out-of-pocket costs – both outpatient visits and outpatient expenditures – for non elderly adults who switched plans in 2014 but kept the same insurer. They hypothesized that individuals choosing the narrow network plan would not have fewer outpatient visits, but would have lower outpatient expenditures. Compared to individuals who switched to a broader network, individuals in narrow network plans were at lower risk of having high healthcare expenditures and had fewer chronic conditions. Despite these advantages, people switching to narrow networks did not have lower outpatient expenditures all else being equal. Individuals in narrow network plans did have higher deductibles in 2013, indicating that they had a history of choosing health plans with lower premiums.

Lowering costs by limiting the options of beneficiaries in a narrow network can be successful in this population – one less likely to use the network overall. If a population has less reason to access the network, there’s no reason to think they would not be able to conform to the requirements of a narrow listing of providers. Narrow network options are worthwhile to assure that these individuals participate in the marketplace.

But once payers cross into the Medicare space or populations with more complex medical needs, narrow networks are sure to be less successful. Costs will inherently be higher as sicker individuals require more services. Insurers therefore would need to balance this risk with more attractive, though more expensive, broad network options. The difficulty remains for low-income consumers with typically worse social determinants of health who can only choose cheaper, narrow network options. Restrictions on how narrow these networks actually are must parallel the concept of a minimum benefits package in order to assure adequate coverage.

commentary by Kameron Matthews

Abstract

OBJECTIVES: To estimate the effects of selecting a narrow provider network on outpatient utilization and outpatient out-of-pocket (OOP) expenditures among individuals who chose to enroll in a narrow network plan in 2014.

STUDY DESIGN: Claims data from a large insurer in the southeastern United States.

METHODS: The sample consisted of individuals continuously enrolled for 2 years (2013-2014) who had Affordable Care Act-compliant plans in 2014. We compared unadjusted results and then used difference-in-differences (DID) models to determine the effect of narrow networks on the number of outpatient visits and outpatient OOP expenditures.

RESULTS: Our DID model found no significant change in visits or outpatient OOP expenditures for individuals who selected a narrow network plan in 2014. However, unadjusted outpatient OOP expenditures and premiums were lower for individuals who selected narrow network plans.

CONCLUSIONS: Our findings suggest that individuals who selected narrow network plans in 2014 were able to keep costs low without changing their overall number of outpatient visits. Narrow network plans can reduce costs to beneficiaries without affecting the volume of outpatient visits, if appropriate incentives to visit participating providers are followed.

PMID: 29087158 Gillen, EM, et al. AJMC. 2017; 23 (9): 540-545.