The Pros And Cons Of Narrow Networks

III. Arguments for Narrow Networks

While narrow network health plans are partly the result of a response to regulations in the ACA by insurers and health systems, they are also the product of changing market conditions in the healthcare industry over the past 10 -15 years. First of all, the backlash against managed care plans in the nineties led to the effects of selective contracting being eroded as provider networks were expanded and benefit design enhanced to allow members to see providers outside the network (albeit with a higher cost share). One consequence of this expansion of provider networks has been the increase in insurance premiums. Another contributing factor to higher insurance premiums has been increased consolidation as hospitals and physician groups have merged forming larger entities and as a result increased market power which in turn has enabled these merged entities to negotiate higher prices with insurance companies (Morrisey, 2009). This consequence of higher pricing as a result of consolidation is not new, and there are many studies both pre-and post-ACA demonstrating this fact.

However, increased consolidation and resulting higher prices (Baker, Bundorf, & Kessler, 2014) is another reason insurers have introduced narrow

For example, a recent study by Health Affairs found that plans with an extra-small network had a monthly premium that was 6.7% less than that of a plan with a larger network (Polsky, Cidav, & Swanson, 2016). By excluding high-cost providers, insurers can significantly reduce premiums, offering a more affordable health plan option for lower income families. It is worth mentioning that ACA insurance subsidies for low-income families are tied to the second lowest cost plan in an area. In many regions, this is often a limited plan network which are in many cases the least expensive (Gruber & McKnight,