What the Adequacy of Narrow Networks Tells Us About Public and Private Exchanges

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.


Magnify Price

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.


Healthy Competition

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


Peter Nichol, empowers organizations to think different for different results. You can follow Peter on Twitter or on his blog. Peter can be reached at pnichol [dot] spamarrest.com.

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Peter is a technology executive with 19 years of experience, dedicated to driving innovation, digital transformation, leadership, and data in business. He helps organizations connect strategy to execution to maximize company performance. He has been recognized for Digital Innovation by CIO 100, MIT Sloan, Computerworld, and the Project Management Institute. As Managing Director at OROCA Innovations, Peter leads the CXO advisory services practice, driving digital strategies. Peter was honored as an MIT Sloan CIO Leadership Award Finalist in 2015 and is a regular contributor to CIO.com on innovation. Peter has led businesses through complex changes, including the adoption of data-first approaches for portfolio management, lean six sigma for operational excellence, departmental transformations, process improvements, maximizing team performance, designing new IT operating models, digitizing platforms, leading large-scale mission-critical technology deployments, product management, agile methodologies, and building high-performance teams. As Chief Information Officer, Peter was responsible for Connecticut’s Health Insurance Exchange’s (HIX) industry-leading digital platform transforming consumerism and retail oriented services for the health insurance industry. Peter championed the Connecticut marketplace digital implementation with a transformational cloud-based SaaS platform and mobile application recognized as a 2014 PMI Project of the Year Award finalist, CIO 100, and awards for best digital services, API, and platform. He also received a lifetime achievement award for leadership and digital transformation, honored as a 2016 Computerworld Premier 100 IT Leader. Peter is the author of Learning Intelligence: Expand Thinking. Absorb Alternative. Unlock Possibilities (2017), which Marshall Goldsmith, author of the New York Times No. 1 bestseller Triggers, calls "a must-read for any leader wanting to compete in the innovation-powered landscape of today." Peter also authored The Power of Blockchain for Healthcare: How Blockchain Will Ignite The Future of Healthcare (2017), the first book to explore the vast opportunities for blockchain to transform the patient experience. Peter has a B.S. in C.I.S from Bentley University and an MBA from Quinnipiac University, where he graduated Summa Cum Laude. He earned his PMP® in 2001 and is a certified Six Sigma Master Black Belt, Masters in Business Relationship Management (MBRM) and Certified Scrum Master. As a Commercial Rated Aviation Pilot and Master Scuba Diver, Peter understands first hand, how to anticipate change and lead boldly.