Until relatively recently, broad-network medical plans – where far more hospitals and physicians were considered in-network for a given health plan – were very common. These days, you are more likely to see narrow provider networks when choosing a plan.
Since the ACA was enacted, health insurers have learned from the public exchanges that creating a narrower network can help save money. There are 3 major ways that health plans have created narrow provider networks. In each of these structures, the health insurer negotiates with doctors and hospitals to create a narrow network and secure lower prices for the employer and the consumer in exchange for increasing the provider’s patient volume.
Here are three ways health plans typically offer narrow provider networks:
Some health plans create multiple narrow networks to choose from that get progressively narrower. For example, if Network A includes all of the health insurer’s in-network hospitals and physicians, Network B might include 90% of Network A’s hospitals and doctors. Since Network B is narrower, choosing that health plan can result in premium reductions. The tradeoff is that fewer hospitals and physicians are designated in-network by the health plan.
Another approach is for the insurer to create two tiers of in-network providers – often called “designated” and “non-designated” – with no out-of-network coverage. Based on treatment information analytics, the insurer can determine which providers have the best outcomes that generally translate to the lowest costs. As a result, the insurer will cover more of the cost to incent members to use providers with the best outcomes. Non-designated providers will still be in-network, but are more costly to visit.
Accountable care organization
This final kind of narrow network structure, which grew in popularity after the ACA was enacted, is the accountable care organization (ACO). The goal of an ACO is to lower patient costs while improving care. In an ACO, a small group of physicians and facilities work exclusively together as an integrated health care delivery system. This might include hospitals, primary care doctors, specialists, and even diagnostic imaging centers.
This model generally means that your primary care doctor and your specialists are used to working together and are communicating about your specific case, with medical records flowing easily among the different practitioners. The small size keeps the doctors and institutions accountable to each other. One way to think of an ACO is like a staff model HMO, but on a much smaller scale.
All of these types of network structures are intended to save you, as an employer and a health care consumer, money. As health care costs to employers and individuals continue to rise, utilizing narrow networks is one way to minimize cost while still providing access to high-quality care.