Done right, narrow networks have advantages for patients

Study finds 36% decline in costs for workers in narrow networks

Some health insurance plans that offer limited choices of providers—known as narrow network plans—could help save money without sacrificing patient care quality, according to a new study.

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Background on narrow networks

Narrow network plans have often worried consumer advocates and insurance regulators because they tend to cover a slimmer group of regional providers than more conventional plans.

However, such plans are appealing to consumers because they tend to be less expensive than standard plans. About 48% of "silver level" plans sold in the health insurance exchanges during the first open enrollment period could be classified as narrow, according to a McKinsey report.

Study details

The study—published as a working paper by the National Bureau of Economic Research—was conducted by economic researchers Jonathan Gruber of M.I.T. and Robin McKnight of Wellesley College. They examined a Massachusetts program that offered employees three months of premium-free health coverage if they chose a narrow network plan. About 10% of workers chose to accept the state's offer.

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Over the one-year study period, the researchers found that employer health care costs dropped by 36% for employees who selected the narrow network plan. This led to a 4.2% decrease in spending for the entire program.

Researchers found that the savings came because the narrow health plans covered physicians and hospitals that charged less than competitors.

In addition to saving their employers money, the participants:

  • Visited their primary care provider more often than other patients; and
  • Use the ED less than other patients.

Although the patients who selected such plans tended to be slightly healthier, the difference was not significant. As such, the results suggest that narrow network plans influenced the way workers use health care services. 

The study did not determine whether switching every consumer to a narrow plan would lead to similar savings and patient care, but does note that such plans could be a favorable option for consumers who are informed about their health care options and are willing to forgo some provider choices for lower premiums. "Nobody is talking about forcing people into these plans. We're talking about offering people a choice with price incentives," Gruber notes.

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 In addition, researchers found that the patients who saved the most money were those who were able to keep their existing primary care doctor, suggesting that a switching to a new narrow network might not be as advantageous as a narrow network that already includes familiar physicians. They note that it is unclear if savings will continue through future enrollment periods (Sanger-Katz, "The Upshot," New York Times, 9/9).

How to understand health insurance exchanges


Looking for background on the Affordable Care Act's insurance exchanges, the state of implementation, and why it matters? Daily Briefing editor Dan Diamond offers a simple, fast-paced primer in just three minutes.


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