- On February 17, 2017
As we constantly search for solutions to help manage health care costs and more importantly, strategies that continue to ease the stinging of mounting premiums, another tactic that health care purchasers are continuing to market is narrow provider networks. By limiting health plan enrollees to a narrower network of providers, health purchasers can negotiate lower costs by ensuring their enrollees go to one system’s core providers. This approach arose primarily to control costs by giving carriers negotiating power—they will deliver more patients, but pay less for each. Net-net, you win. Cost savings were also achieved by excluding outlier physicians and hospitals.
Consequently, the premiums for narrow network plans are on average 15 -17 percent (in general) cheaper than premiums for broad network plans, and the most important factor for a consumer when choosing a plan is enrollee costs (i.e. deductibles, copays, and coinsurance). Although consumers are often influenced in purchasing these plans because of their lower premiums, they should be aware of the network restrictions associated with them and how these restrictions can potentially affect care and out-of-pocket costs (depending on the plan and out of network coverage).
Overall, most individuals enrolled in a narrow network plan are satisfied with the choice of providers under that plan. A Kaiser Family Foundation study published in May 2016, showed that roughly 3 in 4 people were happy with the choice of hospitals and primary care physicians in their plan. That dropped to 59 percent for specialists. Numerous studies have shown that the quality of care delivered through narrow networks is very much the same as that delivered through broad networks.
When it comes to controlling costs, narrow networks are an important element. And since people are generally happy with these networks, the focus should be on finding ways to improve the definition and utilization of them through items such as physician referral tools that help direct members to quality physician and specialists, and transparency tools to help your group make good plan choices and appropriate use of all necessary services.
Whatever happens with the ACA over the coming months and years with the new administration, narrow networks should not disappear. They offer too much potential for controlling costs and coordinating care, without compromising on quality.
As discussed in recent articles, more aggressive cost-containment strategies can be controversial. For example, HDHP plans shift more cost on to enrollees, raising concerns that it might discourage consumers from utilizing health care services even when needed. Precertification, step-therapy and reference based drug pricing sometimes meets with pushback from providers who are not happy being told what drugs they can prescribe, ultimately affecting the patient.
And similarly, narrow networks limit consumers’ access to providers — patients may have to switch doctors or not see a specialist they prefer. But studies generally show that health care quality is similar between narrow and broader networks.
There are disputes on all sides of these issues, and many of these debates may take a long time to figure out and be comfortably accepted. But for now, employers need to think about their specific workforce and how benefits can best be structured to balance the needs of workers with the need to hold down rising health care costs.
By Chris Elvidge, Director of Account Management