NARROW NETWORKS: Less Choice, More Cost Shifting

by David Gimlett, M.D.

As the Affordable Care Act (ACA) unfolds we are now entering the era of the health insurance exchanges. In response to the law’s various requirements the insurance industry is remodeling its concept of provider networks to create new “narrow” networks for the individual and small group markets.  This is a throwback to the failed HMO concept of severely limiting patients’ choices of physicians and hospitals in a cynical effort to control costs. In the exchanges the insurance companies must offer products that cover the list of Essential Health Benefits (EHB) and  their plans must meet actuarial values (AV) specified for various ”Metal” levels, e.g., Bronze =60%, Silver=70%, etc. The AV is the expected percentage of all the medical expenses that the insurance company will pay in that category. Enrollment in a plan cannot be denied on the basis of pre-existing medical problems and there can be no lifetime cap on covered expenses.

In response to these requirements most of the plans being designed in the various states use a narrow list of doctors, hospitals, laboratories, etc. The insurers have large amounts of data to guide them in choosing the least expensive providers. This choice does not concern itself with quality of care no matter how the insurance companies try to frame it. The required size and makeup of the plans is rather loosely defined with federal rules stating that the insurers “must maintain a network of a sufficient number and type of providers, including providers that specialize in mental health and substance abuse, to assure that all services will be available without unreasonable delay.” State rules are generally just as vague.

Every day we now read about the latest shift to narrow networks. In Massachusetts, insurer Harvard Pilgrim launched its Focus Network, plugging 10 percent lower premiums. In California, Blue Shield has a number of SaveNet HMO plans that contract with select doctor and hospital groups, creating networks averaging a little more than half the size of its standard ones. For example, one serving Marin and Sonoma counties will offer a network of about 100 primary care doctors and 325 specialists. Anthem Blue Cross Blue Shield in Wisconsin and Aurora Health Care have secured the first major company to offer their health plan that guarantees cost savings of at least 8 percent for employers (not for patients). This is occurring all over the country. A McKinsey & Co. analysis found 47 percent of 955 plans proposed for the online marketplaces were for health maintenance organizations or plans with similar designs. The New York Times recently published an article by Robert Pear highlighting some of the concerns about this problem. He quotes a recent Pricewaterhousecoopers HealthResearch Institute report that discussed insurers bypassing major medical Centers in numerous states including California, Illinois, etc.

When insured by a narrow network policy it becomes a hazard course for anyone (you) trying to choose a new physician, replace the physician who has known you for years or find a specialist, especially a sub-specialist. “Yes, we have a cardiologist in your area. No, we don’t have an electrophysiologist in your plan. ” Or maybe your primary care physician feels that the best orthopedic surgeon for your type of problem is one that isn’t on your narrow plan’s list. Or the specialist in the network wants you to go to the nearby university medical center. If you make a mistake and go to a non-plan hospital you may end up with thousands of dollars of unpaid bills.  Or the hospital may be on the list but the contracted group of “hospitalist” physicians may not be. And maybe you went to that hospital because you were out of town on vacation. With these hurdles add the fact that the narrower the network the fewer the alternatives and the longer one will have to wait for an appointment.

The plans being offered are low priced and have high deductibles and co-pays. They will appeal to the young and healthy who, at the time of enrollment, haven’t needed medical care.  Patients with multiple and complex medical needs are not going to be satisfied with the limited coverage, limited physicians (may not even include their long term primary care physicians and specialists), and limited hospitals, etc. This gives the insurance companies an opportunity to cherry-pick the least costly patients without violating the regulation against denial for pre-existing illnesses. When they develop their new narrow networks they also refine their cherry-picking techniques even further by mining the usage data from their old networks to weed out the providers who care for the most complex cases. Furthermore they also can count on costs being diverted to the patient when a patient’s care is acquired outside the narrow network either intentionally or unintentionally.  All of this is done under the ruse of cost-containment. The goal is to take in as much money as possible and to pay out as little as possible.

The shell game of cost-shifting to the patient is not cost containment. Of course all of these problems of cost, choice and continuity of care would be non-existent in a system of universal coverage such as single payer medicine.