Narrow networks have huge upside benefits, well up to the point you go off them. Citizens’ behavior drives narrow networks both on and off the Exchanges influenced by price and competition.
The obsession with price transparency incentivizes payers to chip away at price, which in effect erodes plan value. It promotes a destructive cycle where there are no winners. Connecting cost and performance has eluded even the smartest healthcare companies. Or has it? Each health plan offered by state Exchanges must be offered at the same price off state Exchanges. Yes, plans offered off the Exchanges do not have to be offered on the Exchanges. There are greater plan choices off the Exchange including: plan diversity, more providers in network, better deductibles, wider drug coverage — and some plans just simply aren’t available. Increased plan selection options provide broader choice that may more closely tailor plan benefits to citizen needs. These combined factors cause citizens to look around. The decision to expand choice off state Exchanges is deliberate. Health insurers understand price drives selection and by limiting provider networks for on-Exchange plans, health insurance companies are controlling their costs. Narrow networks only offer a partial solution for health insurance companies.
Competition in any industry sounds like a grand idea. As scale increases, unit price often drops. In healthcare we encourage unit price drops (lower costs per episode of care), but many private insurers don’t have the market power to negotiate better prices. If they are unable to attain negotiation power individually, the next logical step is to find a partner, but that violates antitrust laws. We’re back to the partial solution. Cost sensitivity reminds us that expensive doctors are not necessarily better; of course, this reminds me of an old adage: “If you think hiring a professional is expensive, try hiring an amateur.”
The quest for lower costs drives the proliferation of narrow networks, offering the tradeoff of lower premiums for a smaller in-network provider footprint. Until value is perceived as more important than price, narrow networks will continue to be a problem on and off Exchanges. In the 1990’s, health maintenance organizations had their share of narrow networks – citizens didn’t like them then and don’t like them today.
Return of Kings. (2014). The Thrill Of The Mountain (online image). Retrieved December 17, 2015, from http://www.returnofkings.com