Blog Post: The Problem with “Narrow Networks”

In a viewpoint recently published online in the Journal of the American Medical Association entitled “Narrow Networks and the Affordable Care Act,” Haeder and colleagues take on the controversial issue of the so-called health insurance “narrow network,” and warn that “populism” and “rash decision making” may lead to government regulation of insurance networks which might, they argue, be  counterproductive.

First, by way of background: a “network” refers to the physicians and hospitals that are “included” in a particular insurance plan.  Going “out of network” is a perilous pursuit: patients and families can easily accrue thousands or tens of thousands of dollars of medical bills in an encounter with the medical system when outside of the network of physicians or hospitals covered by their insurance plan.

“Narrow network” plans mainly refer to insurance plans purchased on the Obamacare “exchanges” (or marketplaces).  In order to keep premiums down, insurers play hardball with providers: those requesting relatively high fee schedules can simply be excluded from the insurance plan.  As Haeder and colleagues put it:

These so-called narrow networks (plans offered to patients that include services of only a subset of all hospitals and physicians in a geographic area) often severely restrict the choices offered to consumers … Although only a small number of studies have assessed the networks in plans sold in insurance marketplaces, substantial evidence suggests that networks are often narrower in size when compared with commercial insurers’ networks.

Exclusion of particular hospital systems, however, has understandably made many people rather unhappy, and has generated substantial attention from the press.  An AP story from March 2014 headlined “Health law concerns for cancer centers” reported that “some [of] the nation’s best cancer hospitals are off-limits” to patients with some exchange insurance plans.  According to the AP survey, only 4 out of 19 of designated “comprehensive cancer centers” (which responded to the survey) reported that patients would “have access through all the insurance companies in their state exchange.”

Now on the one hand, it is entirely understandable why cancer patients – who have enough on their plates to begin with – would find complex exclusions from well-regarded cancer centers daunting, exhausting, unfair and unjust.

Within the logic of our current health care system, however, the use of network size to contain premiums makes complete sense.  That’s the essence of the “marketplace” concept: insurers vie with one another in the competitive milieu of the “exchange” so as to deliver the lowest possible premium to health care ‘consumers.’

For this reason, Haeder and colleagues accurately argue that limiting the ability of insurers to control network size would at the same time compromise their ability to contain costs.  However, they also urge that at the very least, insurers should be transparent about what providers are available in each plan. They moreover contend that limiting networks could also be used to exclude lower quality providers (evidence on this point, however, is very limited).

At the end of the day, however, we all want to go to the physicians, facilities, and hospitals of our choice.  And there is simply no reason that we can’t: “one big network” in the form of a national health program would make such a reasonable wish a reality.  Within the framework of the Affordable Care Act, however, provider exclusion remains a key cost containment tool (albeit of questionable overall efficacy) of the marketplaces.  It we want something better, then, we have to move beyond that framework.