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Regulators react to debate over narrow networks


New regulations will check the drive to narrow networks, just as the business case for forming them grows more compelling.

On April 4, CMS published its annual Call Letter for the Medicare Advantage and Part D programs. In it, the agency put the managed care industry on notice, stating: “Data gathered by CMS, as well as continued stakeholder concerns, has intensified our concerns with provider directory accuracy. We will continue to aggressively identify and pursue instances of non-compliance by using a host of oversight methods.”

CMS goes on to discuss its intention to fine and impose enrollment sanctions on Medicare Advantage plans with substantial errors in their reported provider networks. The language is, of itself, newsworthy: In its final year, the Obama administration will use waning resources to go after managed care plans for a decades-old problem-provider network inaccuracies.

But the increasing Medicare Advantage oversight is not occurring in isolation; it is one more step in a building reaction to “narrow network” health plans that spans regulators and markets.

This reaction is remaking how regulators oversee health plan provider networks, and will check the drive to narrow networks just as the business case for doing so grows more compelling.

Below is a brief summary of the regulatory landscape.

Commercial market

In November, the National Association of Insurance Commissioners finalized its new Network Adequacy Model Act. It includes sections on provider network adequacy, provider directories, disclosures and consumer notices, out-of-network “surprise bills,” and enforcement. Several states, including red states Georgia and Texas, have passed or proposed legislation to implement parts of the Model Act. In other states, such as Colorado and Ohio, Insurance Commissioners have implemented much of the Model Act via bulletin. Additional states have passed surprise bill and “any willing provider” laws.

Next: Health Insurance Exchanges and Medicare advantage


Health insurance exchanges

CMS, as the administrator of the Exchanges in two-thirds of states, has published its network adequacy review requirements for the first time and established new requirements for consumer notices and surprise bills. Plans must now create “machine readable” provider directories which can be checked regularly by regulators and researchers, and facilitate inter-plan comparison.

Read: State exchange first to set quality, cost standards for health plans

This fall, the agency will rank Qualified Health Plan provider networks for the first time. One state-run Exchange, California, has moved even further-establishing provisions by which the Exchange can remove providers from a network for low quality scores.

Medicare advantage

In addition to the Call Letter guidance noted above, CMS has recently published other new requirements regarding provider network directories, consumer notices, and special enrollment periods for midyear network changes.

The agency has expanded the scope of its provider network reviews beyond new applicants. Spurred by a critical GAO report, the agency has put the industry on notice that it will levy sanctions against MA carriers that do not meet its standards and has foreshadowed requiring machine readable directories in the future.


Medicaid managed care regulation varies greatly from state to state. A year ago, the Department of Health and Human Services Inspector General issued a report documenting significant problems in Medicaid health plan provider networks and state oversight.

In April, CMS issued a sweeping regulation that will remake how Medicaid health plans are regulated.  The regulation requires states to: have quantitative standards for measuring provider network adequacy; assure that provider directories arekept current; and assure that managed care plans providers that serve non-English speakers. CMS will defer to states to set the specific compliance standards, but the regulation forces states have clear standards in place for 2018.

Meanwhile, some states have already stepped up their oversight, including fines exceeding $500,000 in California for provider network directory errors.

Next: Critical takeaways



Critical takeaways

Provider networks are narrowing-a string of reports prove this. But, it is much less clear if large numbers of consumers are harmed by this narrowing.

A study of California health plans found no correlation between network size and quality. A Michigan study concluded that network breadth was the least important of several factors to consumers selecting a health plan. A recent essay published in Health Affairs suggested that provider networks built around provider associations and referral patterns matter more than the size of the network. Finally, a recent Robert Wood Johnson Foundation study notes the promise of telehealth and its misalignment with network adequacy approaches that simply “count” providers.

Meanwhile, health plans are increasingly incented to narrow their networks. Exchanges and other comparison tools encourage consumers to shop based on premium, and narrow networks hold down costs. Emerging value-based payment models are premised on health plans driving their members to “high-value” providers that deliver targeted outcomes. And emerging accountable care models are premised on highly cooperative providers with tight referral patterns. These trends incent narrow networks and dis-incent “any willing provider,” open-access, and other broad networks.

All of this suggests that 2016 will be a year of unprecedented tension between regulators and health plans regarding provider networks. For managed care industry leaders, it is best to recognize this tension and get out in front of correctible problems-such as correcting errors in provider directories.

There are already new tools that measure competing provider networks using machine-readable data, and customized mystery shopping solutions to catch provider network errors. There is also an opportunity to educate regulators on the differences between a broad network and high quality network.

As the research on provider networks matures, so will the debate. Health plans will have the chance to help regulators consider emerging measures of network quality while complying with today’s measures of network adequacy.

Michael S. Adelberg is senior director, FaegreBD Consulting, where he focuses on regulatory issues impacting managed healthcare. In addition to holding vice president positions in the industry, he developed and implemented provider network policy during 15 years at CMS, including as the director of Medicare advantage operations and the acting director for exchange policy and operations.

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