Looking for balance in health plan networks

Editor’s note: The post originally appeared on the JAMA Forum.

Choosing a health plan in the newly created health insurance exchanges has become technically smoother. But in many ways, it seems that the reduction in glitches has been traded for an overwhelming array of network choices.

The proliferation of insurance plans that offer “narrow, ultra-narrow, limited, high-value, high-performance or skinny networks” that include or exclude specific clinicians and hospitals highlights both troublesome problems in the quest to improve the US health care system, as well as promising solutions. Such networks predate the Affordable Care Act (ACA), with roots in many employer-sponsored plans in the 1990s attempting to constrain costs in a managed care–conscious era.

Since the passage of the ACA, an increasing number of plans with varying levels of “narrowness” have permeated into health insurance exchanges. In general, the more limited the network, the lower the premiums.

However, growing concerns over both the real and potential consequences of limited choices have led to political outcries from both Democrats and Republicans and calls for increased transparency and state and federal regulatory reforms. Ideally, the goal of any actions would be an optimal insurance market with just the right number of clinicians and hospitals, the right number of choices, and the least burdensome but most effective regulatory structures.

Finding a Balance

But striking such a balance will be difficult. It helps to begin with an understanding of who is involved, what’s at stake, and what are the pertinent issues.

Insurers. The insurance industry sees narrow networks as an approach to both create competitive advantage through lower premiums and potentially improve quality through the inclusion of higher-performing hospitals and physicians. A typical “narrow network” means that approximately 31% to 70% of all hospitals and physicians in a particular insurance rating area participate in the network. The network size is important: if it’s too small, the insurer may have to offer in-network benefits to out-of-network providers; if it’s too big, costs could increase. For now, the strategy of narrowed networks seems to be working for insurers; median premiums continue to be lower for narrow-network plans compared with broader networks.   

Regulators and legislators. Legislators and regulators are under pressure to be responsive to the effects of the ACA’s provisions around essential health benefits, network adequacy, and qualified health plans that capped out-of-pocket costs and standardized certain benefits. Networks are currently subject to different reviews at the state and federal level. Numerous states have introduced legislation mandating increased oversight of narrow networks, more accuracy of provider directories, as well as “any willing provider” laws, which essentially constrain the insurer’s ability to exclude a provider from a network.

Physicians, hospitals, and health systems. Much attention has been paid to hospitals being included or excluded in networks, but affected parties range from large academic health systems to physicians in solo practices. Most insurance companies are dealing with hospitals and larger systems with respect to network development, but in rural areas, a solo specialist may be the only choice in a particular network. In turn, individual clinicians have become frustrated when network limitations result in difficulty finding referrals for patients. And as we have seen from high-profile cases surrounding the exclusion of systems such as Cedars Sinai, large health care organizations and systems do not want to be excluded from networks but also do not want to necessarily negotiate on prices with insurers.

Consumers. Unsurprisingly, consumers generally want to find the most affordable plan that allows for just the right amount of access—not so extensive that the number of options is overwhelming, but not so constrained that appointments or locations are inconvenient. Many, however, are unaware of their network choices, according to a recent report by the McKinsey & Company’s Center for US Health System Reform. And when consumers try to select physicians from a network, inaccurate provider directories and confusion over their out-of-pocket responsibilities, such as copayments and deductibles, might make the task more difficult. Even more frustrating is the scenario of a patient who goes to an in-network facility and is blindsided to learn that an aspect of his or her care was performed by an out-of-network specialist, leaving the patient responsible for the financial consequences of such a scenario.

Actionable Priorities to Move Ahead

Instead of lamenting the complexities of the growing numbers of networks, there are 4 areas for action that could help improve the marketplaces:

  1. Meaningful network transparency and insurance literacy. Unfortunately, many consumers and individual clinicians have little knowledge of their health plan network and its benefits and limitations or how it stacks up against other available networks. Although publishing accurate directories would be a good start, guidance is also needed to help individuals understand the implications of an insurance plan, such as access and choice of clinicians. Health insurance literacy is important because many US consumers do not understand out-of-pocket costs and other insurance benefits. They should be able to both choose a plan and understand how to use the its associated benefits.
  2. Ongoing monitoring of network clinician capacity. In a perfect world, all clinicians would improve their quality, and network “value” would be distributed equally. In reality, however, it is possible that multiple plan networks will have the same choices, thus overwhelming a discrete proportion of the clinicians across the country. This can become especially true for certain specialties such as oncology and surgery, in which patients might have extremely limited choices, resulting in high out-of-pocket costs and geographically undesirable options to receive care.
  3. Developing a standardized exceptions process. Such a mechanism would allow consumers to address network restrictions in a timely fashion while not creating numerous different processes to evaluate appeals.  This can be especially important when an out-of-network provider provides services in an in-network hospital.
  4. Support the systematic research of networks and their effects. Many people might be shocked to learn that there currently is no reliable source of information about networks and how they develop; no concerted research effort dedicated to the comprehensive effects of networks on cost, quality, and access; and little to no attention on how to help consumers choose a plan and understand their network.

As the recent Supreme Court decision of King v Burwell highlighted, “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.” Similarly in working toward the goal of improving health insurance markets, it is important to acknowledge the growing role of network choices and opportunities to create networks that work in a world where information is imperfect.