Pros And Cons Of Narrow Network Health Care

Despite the controversial nature of narrow network health plans, they have gained significant traction since the enactment of the Affordable Care Act (ACA) in 2010, especially in the individual market. Narrow network health plans, which consist of a reduced panel of physicians and hospitals are essentially a form of selective contracting used by insurers to manage their costs. Insurers purport that these plans offer consumers the best of both worlds, specifically, lower premiums and a network of high-quality healthcare providers. However, many consumers are unaware of this limited network until after they have purchased their plan (Demko, 2014), when they are confronted with the harsh reality of not being able to see the provider of their choice.

Background:

Narrow network health plans are defined by Fair Health as plans that have a lower monthly premium and as a trade-off, a limited choice of providers (Fair Health, 2017). However, the Urban Institute elaborates on this definition by outlining the fact that narrow networks are established using cost and in some cases quality criteria to select health care providers from a broad provider network. The implementation of strong incentives are then put in place to encourage consumers to obtain care from just that set of providers (Delbanco, Murray, Berenson, & Upadhyay, 2016).

Neither of the previous definitions of narrow networks portrays just how limited the choice of providers may be or what the incentives are. A study by McKinsey in 2014 goes much further by defining a narrow network as one that includes 31% - 70% of all hospitals in a participating area and an ultra-narrow network is defined as having less than 30% of all hospitals in a particular area (McKinsey & Company, 2014). While the McKinsey & Company’s study evaluates hospital coverage, a study by Polsky & Weiner assesses physician participation in narrow network plans. Polsky and Weiner find that the majority, i.e. 41% of networks are small or extra small which by their definition means that they include less than 10% of office-based physicians in the area (Polsky & Weiner, 2015). Consumers are incentivized to seek care inside the limited network by the application of a generous in-network benefits in

First of all, many of the strategies used by insurers to attract healthier members and to manage their costs, for example, health status underwriting and the elimination of lifetime and annual maximums, were prohibited by the ACA. Therefore, selective contracting in the form of limited provider contracts and less generous benefits are the few available mechanisms insurers can employ with the same goal of attracting healthier patients and in turn containing costs in the individual Marketplace. What’s more, there is a high level of transparency for consumers in evaluating the differences in price between plans on the exchange which created an incentive for insurers to offer a lower cost option (Giovannell, et al.,