Warning issued that savings generated by narrow networks shouldn’t come from penalizing patients who need more care.

Oct. 5—While questions remain regarding the effect narrow provider networks have on patient access and choices, researchers identified how much they can save: From 6.7 percent to 13 percent on silver plan premiums.

In a new study published in Health Affairs, University of Pennsylvania researchers used data from all the silver plans offered on the government-run marketplaces in all 50 states and the District of Columbia to calculate the cost of premiums based on the size of the physician network offered.

Other research, such as a McKinsey & Co. analysis, have defined narrow networks as including no more than 70 percent of an area’s hospitals, but a University of Pennsylvania team looked at how many physicians were in the network. They categorized the networks as extra-small (less than 10 percent of physicians in an area participating), small (10 percent to 24 percent), medium (25 percent to 39 percent), large (40 percent to 59 percent), and extra-large (60 percent or more).

The average silver plan’s network includes 30 percent of a service area’s physicians, costs $266 each month, and has an average annual deductible of $2,774 and a $32 copay per primary-care visit, according to the study.

The difference in cost was 13 percent between an extra-small and an extra-large network and 6.7 percent between an extra small and a large network. There were no significant differences in cost between the other plans, leading the researchers to conclude that this “suggests that very restrictive plans do not tend to be cheaper than moderately restrictive plans.”

‘A lot of Groceries’

The 6.7 percent difference was calculated to equal an annual savings of $212 for a 27-year-old single individual, $339 for a 50-year-old individual, and $692 for a young family of four.

Linda Blumberg, a senior fellow with the Urban Institute’s Health Policy Center, thought the 6.7 percent figure might be a little low, and said she’s heard others suggest the difference was closer to 10 percent -- which she said adds up for consumers.

“When you’re talking about an insurance premium costing thousands of dollars, 10 percent is a lot of groceries,” Blumberg said.

The study’s authors went further and linked successful implementation of narrow networks to success for the government policy objective of expanding health insurance coverage. Citing how silver plan premiums are often supported by government subsidies, they also linked narrow network savings to reduced government spending.

“Given the subsidy structure within the marketplaces, the benefits of lower premiums not only accrue to the consumer but also generate savings for the taxpayer,” the authors wrote. “Thus, the lower premiums from narrow networks help reduce the number of uninsured people and reduce the cost of achieving that policy objective.”

Blumberg agreed, and she described narrow networks as “an important piece of the healthcare landscape that could catalyze lower costs.”

Bad Memories Linger

Narrow networks still, however, are not always viewed positively despite their ability to offer insurance at a lower price. Blumberg said this might be a lingering effect of the chaos surrounding the 2014 roll out of the marketplace.

“There was enormous amounts of confusion with physicians themselves not knowing whether they were in a network or not,” Blumberg said. “I haven’t heard much of that lately.”

To this point, the study authors cited 2014 study in which 26 percent of consumers were unaware of how narrow the network was for the plan they chose.

Surveys suggest the vast majority of consumers are satisfied with their marketplace plan’s physician network, according to a Health Affairs health policy brief published in July. But anecdotal complaints have “proliferated” mainly due to some plans excluding high-profile hospitals from their networks and these exclusions generating media coverage.

Hospital choice is particularly valued by older consumers. In Massachusetts, 60-year-olds were willing to pay $1,200 to $1,400 more for plans with a broader network, according to a 2015 report published by the American Economic Review and cited by the University of Pennsylvania researchers.

Blumberg warned that there can also be access and cost issues for high-need patients who may have to go out of their network for needed services. She believes that these individuals should not have to pay the higher out-of-network price for services their plan is not providing.

“Just because you’re in a narrow network doesn’t mean you’re in a bad network,” Blumberg said. “But, if plans are not providing appropriate care or appropriate access, then some intervention is required.”

Providers Affected

Two basic ways of lowering spending is to lower prices and lower utilization, but “when reducing use, you have to make sure you’re not penalizing people who need more services,” Blumberg said.

She added that there should be honesty about where the savings are coming from.

“We shouldn’t have illusions that we can contain costs without taking money away from providers,” Blumberg said.

David Harlow, principal of the Harlow Group healthcare consulting firm, wrote in a 2013 blog post that “we’ve been kidding ourselves” by pretending that managed care can work without managing networks -- which often means limiting them.

Harlow stands by this opinion.

“Managed care can save money, but only if care is actually managed,” Harlow said in an e-mail. “One aspect of that effort is creating narrow networks.”

Andis Robeznieks is a freelance writer based in Chicago. Follow Andis on Twitter at @AndisRobeznieks.

Publication Date: Wednesday, October 05, 2016