Employers May Adopt ‘Narrow Networks’ of Health Care Providers

confused“There are signs that employers’ interest in narrow networks may grow in the near future.”  But that is problematic. Why limit choice of providers when you can simply pay all providers the same? That solves access and financial issues for plan sponsors where the difference between profit and loss many times is tied to health care costs. Isn’t it about time consumers realize they are helping to drive costs up by accepting terms and conditions set by insurance companies and complicit plan sponsors too dumb to realize the implication of good intentions (providing employee health insurance) is having a reverse effect on their bottom line? – Signed: Ranting and Raving (Name held upon request).

Employers May Adopt ‘Narrow Networks’ of Health Care Providers

The use of “narrow networks,” which limit to a handful the number of health care providers covered in-network by a health plan as a way to keep costs in check, has not been embraced by most employment-based group health plans—at least not yet.

Despite employers’ slow adoption of narrow networks, more are considering limiting their plans’ in-network health providers and selecting those that make the cut based on whether they offer pricing discounts for their services, according to a new analysis published by the nonprofit Employee Benefit Research Institute (EBRI) in Washington, D.C. So-called high-performance networks limit providers to those that have high-quality ratings for their services, although the two approaches to selecting covered providers—price and quality—are not mutually exclusive.

The report, Narrow Provider Networks for Employer Plans, was published in the Dec. 14, 2016,EBRI Issue Brief.

Employers Interested but Cautious

The prominence of narrow networks in plans that are available on the Affordable Care Act’s (ACA’s) health exchanges “so far has not translated strongly to private-sector employers. But there are signs that employers’ interest in narrow networks may grow in the near future,” said Paul Fronstin, director of EBRI’s health research and education program and co-author of the report.

To measure what’s happening with narrow networks in employer health plans, the researchers used various methods to collect and analyze plan data, including interviewing HR directors at 11 large, unnamed U.S. employers. Among their findings:

  • Despite the increasing prominence of narrow networks in the ACA’s marketplace exchanges, in 2016 only 7 percent of employers with health plans offered a narrow network.
  • Reasons employers gave for their subdued interest included absence of a track record showing sustained (year-over-year) savings, concern about antagonizing workers and greater interest in other cost-savings strategies.
  • More than one-third of large employers with 5,000 or more workers now offer some type of alternative network with lower premiums as a plan option. Field reports also indicate increasing adoption of narrow networks by both large and small employers, particularly in urban markets around the country.
  • Many of the large employers interviewed for the study were at least considering the possibility of adopting or expanding their use of narrow networks in future years.

Responding to employer interest, several of the major national carriers—including UnitedHealthcare, Aetna and Cigna—are offering employers narrow or other alternative networks covering at least several dozen metropolitan areas, as are many state-based Blue Cross and Blue Shield plans, the report states.

[SHRM members-only toolkit: Managing Health Care Costs]

“Where narrow networks are offered, their adoption could be increased by giving workers stronger financial incentives to consider them,” Fronstin said. For instance:

  • Offering workers a fixed (defined contribution) dollar amount to apply toward health plan premiums and a choice of higher premium/wide network and lower premium/narrow network plan options is one way to confer such incentives, as employees would spend less out of pocket for the narrow network plan.
  • Private exchanges are also a way to offer workers a broader range of plan choices, including narrow network plans with premiums lower than plans with broad provider networks, he noted.

Currently, however, neither defined contributions nor private exchanges are widely used by employers, Fronstin pointed out.

Article Written By Stephen Miller, CEBS    Jan. 10, 2017