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    Narrowing networks

    What the rise of narrow healthcare networks means to physicians and their relationships with patients and payers

    Narrow networks occur, in part, because of the nation’s reliance on market forces to mold industries. In other areas, consumers welcome these forces.

    “The attempt to limit suppliers that provide a product isn’t new or unique to healthcare,” says David Blumenthal, MD, president of The Commonwealth Fund. “The ultimate example of that is Wal-mart, which beats up its suppliers to get the best prices to sell cheaply to customers.”

    In retail, a price-for-volume discount is readily accepted. Consumers want their money to stretch, but in healthcare “it gives us the jitters,” Blumenthal says.

    Patients want lower premiums, but they also want experimental treatments if they are diagnosed with a rare condition. “We want the market in abstract, but not in fact, in healthcare,” he says.

    The ACA didn’t create narrow networks, but it has increased their prevalence. Experts say these plans are here to stay, and physicians and regulators are working to ensure they don’t stymie contracts, access and physician reimbursements.

    A growing trend

    According to a report by McKinsey & Company, almost half of the plans offered in the 2014 state health care exchanges had narrow networks. These plans typically lower costs: almost 70% of the lowest-priced products on the exchanges are narrow network or tiered plans.

    Related: Narrow networks: ACA's broken promise and how doctors and patients can fight back

    The ACA has ratcheted up the pressure to reduce costs, in part because it has left payers with few options for keeping the costs of their plans down. Insurers can no longer reduce benefits beyond a certain point or cherry-pick healthy patients to keep premiums low.

    In addition, consumers can compare plans in a true apples-to-apples fashion for the first time. McKinsey found that price is an important consideration for consumers. In simulations of the exchange purchasing experience, McKinsey found that 65% of consumers chose less-expensive plans with narrow or tiered providers in bronze and silver-tier plans. Even in the gold and platinum tiers, almost one-quarter of consumers picked lower-cost, narrow networks.

    The private market and exchanges, where narrow networks are more prevalent, include a relatively small portion of most providers’ patients. Currently about 16 million get health insurance coverage there, though McKinsey estimates that could increase to as many as 36 million by 2019.

    Expansive provider networks have been a hallmark of employer-sponsored plans, and that hasn’t changed dramatically, says Alexander Domaszewicz, MBA, a principal and senior consultant with Mercer Healthcare Consultants. But that could be changing.

    For many years, employers focused on reducing costs, under the theory that if employees are healthy they will need less care.

    Recently, however, some employers have begun to look at the provider side of the equation and experiment with reducing costs through on-site clinics and telemedicine, and by steering employees toward less-expensive providers.

    “They are taking a much harder line on where they send folks,” Domaszewicz says. “Narrow and tiered networks play into that.”

    He estimates that between 15% and 20% of employers are using narrower networks. The trend is more prevalent among larger employers, and where demographics allow it to occur.

    “I think that having access to basically any doctor or hospital … the price tag for that is going to ultimately be too high for most employers to offer and we are going to see more narrowing of PPO [preferred provider organization] networks,” says Gerald Kominski, PhD, director of the UCLA Center for Health Policy Research.


    NEXT: Battling on all fronts

    Tammy Worth
    The author is a freelance writer based in Blue Springs, MO.


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