July 10, 2014 | Rosemarie Day

Exchanges and Narrow Networks – What Did Consumers Choose?

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One of the elements of health reform that’s getting a lot of attention is narrow provider networks, i.e. those health plans that limit the number of providers that customers can see.  There are concerns that even if people were able to get health insurance coverage, they may not be able to see the doctor they want to see – many doctors and hospitals don’t participate in narrow network products.  Narrow networks are prevalent: they represented about half of the hospital networks being offered on health insurance exchanges.  The biggest argument in favor of narrow networks is that they are cheaper than traditional broad network products.  As exchange offerings evolve, it is important to understand what consumers chose and on what basis they made their choices.  Let’s take a deeper dive…

WERE NARROW NETWORKS CHEAPER?

  • Yes!  Narrow networks offered on exchanges were less expensive than broad network products by about 15% (median difference in value), with the highest amount of savings being over 50%.1

     

  • They were a central feature of most of the lowest price products being offered.

This means that narrow network products helped to provide consumers with more affordable choices on exchanges.  

HOW MANY BOUGHT THEM?

  • Narrow networks turned out to be fairly popular on exchanges.  Virtually everyone who bought health insurance through exchanges had a narrow network option.
  • One survey indicates that 42% of those enrolled in an ACA plan (who were aware of what type of network they bought) reported buying a narrow network product.1

A significant number of exchange consumers purchased narrow network products.

WHO BOUGHT THEM?

  • Those who were previously uninsured were more likely to select a narrow network product.
  • A Kaiser poll of consumers revealed that they preferred lower cost, narrow network products if they were uninsured or had to buy their own insurance.  If the employer was paying, they would tend to choose higher priced, broad network products.3  This isn’t surprising, given most people’s sensitivity to price.

Exchange consumers are price sensitive and are more likely to buy narrow network products if they were previously uninsured.

BUYER BEWARE

  • One of the concerns about narrow networks is that people won’t know when they bought one and could be surprised when they realize that a doctor they wanted to see is not in their network.
  • In fact, one survey indicates that 26% of those purchasing an ACA plan did not know whether they had bought a narrow or broad network plan.1

Exchange consumers may need more information to understand the products they purchased, especially if it’s a narrow network product.

WHAT SHOULD INSURERS AND EXCHANGES DO?

Exchanges did not invent narrow networks, but they are becoming a huge vehicle for selling them.Exchanges and their insurer partners need to take extra care to be sure that their customers know what they are buying.  Not doing so will have huge implications for customer satisfaction and retention.

  • Labeling:  Exchanges need to clearly label narrow network products.  The Massachusetts Health Connector learned a tough lesson when it launched narrow network products many years ago.   Massachusetts is a state where people were used to broad provider networks.  This meant the Connector had some upset customers when the customers realized they couldn’t see their usual doctor with the product they’d chosen.  The Connector had to allow some people to switch products, and worked hard after that to ensure that its narrow network products were more clearly labeled.
  • Quality Measures:  Not all narrow networks are created equal in terms of quality measures, so exchanges should label this as well.
  • Surveying:  Insurers and exchanges need to survey customers regarding their satisfaction with narrow network products.  Policy makers should take a look at which exchanges have done this well and urge replication of best practices.
  • Tiered Networks:   Exchanges and some insurers can offer tiered networks as an alternative to narrow networks.  In tiered networks, consumers can have access to all provider networks within the same product, but at different price levels.

Narrow network products are an important option for exchange consumers but require extra attention so that they are well-implemented.  

 

Footnotes:

1. McKinsey Center for US Health System Reform, June 2014. “Hospital Networks: Updated National View of Configurations on the Exchanges

2. Trends: Narrow networks were being offered before the ACA was implemented. In employer sponsored insurance, 15% of enrollees selected narrow network plans in 2007; that rose to 23% in 2013.  The ACA is accelerating this trend through exchange offerings, where consumers pay most/all of the cost of their insurance.

3. Kaiser Health Tracking Poll, February 2014.

Additional Sources:

Commonwealth Fund, David Blumenthal, February 2014. “Reflecting on Health Reform – Narrow Networks: Boon or Bane?

Image: Kaiser Health News, “Narrow Networks Trigger Push-Back From State Officials”