As consumers become more sensitive to cost, narrow choices don't seem all that bad
Narrow networks are making a comeback, and they feel distinctly different from the tight HMO networks of the 1980s and 1990s. I attribute the trend to consumers’ growing lack of tolerance for the status quo in healthcare.
Decades ago, those who complained about their HMO networks were predominantly enrolled in generous, large-group plans. Used to having good benefits, workers were turned off by the idea that they couldn’t choose absolutely any doctor or hospital, and they were especially annoyed by being locked into a PCP who needed to-in their eyes-“approve” specialist care.
They only saw the limiting aspect of networks and were bent out of shape about the whole arrangement. Members didn't realize that the tight HMO network and the tecniques of managed care helped to keep their premiums and copays lower. Remember that back in the day, the cost of care was totally opaque to members who rarely contributed more than a $10 or $15 copay.
Today, however, consumers are feeling a whole new range of emotions related to healthcare-including the pain of much higher cost sharing. Now those networks seem a bit more tolerable but only because they translate to lower out-of-pocket costs. No one likes giving up choice, but then again, no one likes giving up hard-earned cash either.
Another difference between then and now is that narrow networks don’t call for a PCP gatekeeper, so that’s an improvement, too.
On a broader scale, the newly insured who sign up for narrow-network products will probably be pleased to have access to routine care-an improvement over no access at all.
Plan sponsors are driving the trend toward narrow networks.
Several of my favorite industry thought leaders got together last month to discuss provider market consolidation, and in the discussion, narrow networks came up several times.
Suzanne Delbanco, who leads Catalyst for Payment Reform, says employers are increasingly looking not just at narrow networks, but at directly contracting with the providers of those networks. If sponsors are able to identify high-performance providers and get a good deal, they’ll find the incentives to funnel employees in their direction.
Delbanco says Wal-Mart has even included a travel benefit as an incentive for employees to choose centers of excellence. Its employees across the country who opt for the high performers for certain services can access those facilities, even if the providers are outside of the local area.
Also consider that some payers and providers are creating new partnerships to launch what are basically exclusive health plans, inside of and outside of the exchanges. AmeriHealth New Jersey did it recently with Cooper University Health Care, which now owns a 20% stake in the payer organization. Together, they will create a Cooper narrow network plan.
Exchanges-public and private-are ideal venues for narrow-network and tiered-network products. As many as 20% of enrollees are expected to be in some type of exchange by 2017, according to Accenture. The possibilities are clear.
Market forces and policy changes can further the trend in narrow networks. Plans have an opportunity to gain a competitive advantage if they move quickly to contract with the best of the best.