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JAMA Forum Archive, 2012-2019: Health policy commentary from leaders in the field
JAMA Forum

Much Ado About Narrow Networks

The bumpy rollout of the health insurance coverage expansion by the Affordable Care Act (ACA) through private insurance exchanges ultimately exceeded enrollment expectations. The question is no longer whether the public will embrace these new health insurance marketplaces, but whether individuals are happy with their ability to use their new plans to access care.

Andrew Bindman, MD

In several states, there are concerns that the networks of physicians available through health plans sold in insurance exchanges are sometimes too narrow, limiting access to care and disrupting long-standing patient-physician relationships for some enrollees. The concern has surfaced mainly in the form of anecdotes, with no reliable estimate of how many individuals are negatively affected. But physician organizations have been quick to ring the alarm bell on behalf of patients and, presumably, their own self-interests.

Cost-cutting Déjà vu?

There is a striking familiarity about this concern that harkens back to the 1990s, when consumers pushed back against attempts by managed care organizations to limit their choice of physicians. In response, many health plans redirected their cost-cutting efforts away from narrow networks and focused instead on limiting benefits and finding ways to keep high-cost patients from joining their plans.

The regulatory requirements within the ACA have removed these cost-saving maneuvers by standardizing the essential benefits health plans must provide and by eliminating opportunities for health plans to select against high-cost patients. With these options constrained, it is perhaps not surprising that health plans would once again turn to narrow physician networks as a means to control costs.

Narrow networks can reduce a health plan’s cost by reducing access to high-cost services and by directing patients to physicians who accept lower payments in return for promises of higher volume. There would appear to be obvious potential for savings, as the recently released Medicare physician payment data revealed marked variation in the intensity of services and payment amounts to physicians; fewer than 2% of physicians generated 24% of the total payments. If plans are able to avoid these sorts of high-cost physicians, who are disproportionately clustered in a few specialties, there is the potential for real savings. How much might plans save by using a selective process to prevent high-cost physicians into their networks? Estimates vary, with some suggesting it could be as high as 25% of costs.

The outcry associated with narrow networks might be more muted if it were clear that networks were excluding only extreme high-cost outlier physicians and including physicians of similar or better quality who could provide the same services. Patients are particularly interested in having their regular source of primary care available through a plan’s network—and when that’s not the case, it raises concerns about the quality of all of the available physicians.

The lack of transparency about how plans decide who is in the network and who is excluded undermines the patients’ and physicians’ confidence in the process. What’s more, during the initial rollout of insurance exchanges, many of the participating plans provided consumers with misleading information about their physician networks. As a result, many individuals signed up for a plan that they believed would include their regular physician, only to find out afterwards that that was not the case.

Strength in Numbers

Physicians are attempting to outflank plans’ attempts to form narrow networks by forming groups with significant market control. By negotiating as a large group, physicians hope to prevent plans from being able to select among them to create narrow networks at lower rates. To further reinforce their position, physician organizations are encouraging legislators to pass “any willing provider” laws that would require plans to contract with any qualified physician.

Although these strategies maximize the potential for access, they provide high-cost physicians with a safe haven to continue practice as usual, which could undermine the effectiveness of health plans to control costs. What is needed are clear ground rules for how and when health plans should be allowed to narrow their networks, rules that would balance the competing interests of preserving access and quality while allowing for some cost controls. Health insurance exchanges might be a good place for establishing these rules, particularly in states where the exchange has already positioned itself as an active purchaser working on behalf of consumers.

Standards are needed for physician network adequacy, just as there have been standards established for different levels of insurance coverage (bronze, silver, gold, and platinum tiers). Such standards should address the number of physicians by specialty categories that are available on a population and geographic basis for the plan. For example, there are some rudimentary federal standards for the number of primary care and specialist physicians needed on a population basis that were derived from data in integrated health plans. These could be updated and perhaps modified to take the population’s health risk, geographic barriers, and other priorities into consideration when applying to the health plans in a particular state.

Out-of-pocket Costs

There should also be a routine assessment made of how a plan’s network affects out-of-pocket costs for its enrollees. Plans with overly narrow networks are likely to have more patients receiving care outside of the network, care that incurs higher out-of-pocket costs. Including these patient costs in the assessment of the actuarial value of a plan would result in a more honest valuation of a plan in an insurance exchange.

Insurers should also be required to be transparent in how they decide which physicians are included or excluded from a plan’s network. Physicians and consumers should be able to see the data on costs, quality, and other factors used to make network decisions so that there is both a shared understanding of how physicians are being evaluated and an opportunity to identify and correct erroneous information. If the decision is based on the performance of the physician’s group as opposed to the specific performance of the physician, that should be made explicit as well. Ideally, insurers would disseminate a clear set of performance standards that would let physicians and consumers know what physicians in a plan are expected to achieve in terms of access, costs, and quality in order to be a part of the plan’s network.

In the end, patients will decide if they are willing to accept narrow networks as a means of lowering health care costs. Although this approach failed in the 1990s, plans may have few alternatives as a means to control costs this time around. Faced with narrow networks or steep increases in premiums, patients may be willing to give up some amount of choice, particularly if they can be convinced that their plan is excluding physicians who are the true high-cost outliers and not the patients’ relatively low-cost primary care physicians.

About the author: Andrew Bindman, MD, is Professor of Medicine, Health Policy, Epidemiology and Biostatistics at University of California San Francisco (UCSF). He is the founder and Director of the University of California Medicaid Research Institute, a multicampus research program that supports the translation of research into policy.
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