Tuesday, July 1, 2014
One of the big cost-saving developments of the ACA is the proliferation of narrow networks among health plans. Narrow network plans may seem to save the patient money through lower premiums, but there are hidden costs to narrow networks for patients in the form of out-of-network charges.
A narrow network is the phenomenon when health plans contract selectively with a limited range of providers who agree to substantially discount prices in exchange for being part of the network. Narrow networks are nothing new—the HMO revolution in the 1990s (and its subsequent backlash) achieved cost-savings in part through narrow networks. The ACA did not invent the narrow network, but it has accelerated the trend because of the transformation of the nongroup and small group insurance market through the exchanges and the ACA’s limits on health plans’ ability to engage in underwriting or to narrow benefits to keep premiums down. Thus, one of the remaining strategies for health plans to keep their prices in check is to offer narrow networks of providers.
Narrow networks, though historically unpopular with patients, are hailed as effective cost-control measures. To the extent that individuals purchasing on the exchanges have the ability to choose between lower premiums and narrower networks or higher premiums and broader networks, perhaps a more efficient sorting of preferences will emerge. There are a couple problems with these assumptions: (1) many patients shopping on the exchange cannot tell they are getting a narrow network from the plan description; and (2) cost-conscious patients that choose the narrow network plans to save money on premiums may find themselves at risk for higher out-of-pocket costs because of the narrow network.
Regarding the second scenario, a narrow network makes it more likely that the patient will inadvertently find herself out-of-network. For example, a patient may be taken via ambulance to the nearest emergency room, which is out-of-network, or the patient may carefully choose to go to an in-network hospital only to discover that the physicians who provided care at the hospital were out-of-network. If a patient’s health plan covers out-of-network care at all, it usually comes with much heftier cost-sharing. Co-insurance will be higher and there may be a separate out-of-network deductible or the out-of-network bills may not count toward the patient’s deductible or out-of-pocket maximum. The other problem is that the ACA does not prevent out-of-network providers from balance billing the patient for the difference between the amount paid by the health plan and the provider’s full charges. This amount may be half or more of the total bill, which may be tens of thousands of dollars for an inpatient visit.
Although this information is disclosed in the plan documentation for those who bother to read fine print, in practice it is increasingly difficult to avoid out-of-network charges when you have a narrow network plan. Narrow networks may result in more affordable premiums and even blunt rising provider prices, but they expose patients to unpredictable and often unaffordable out-of-pocket costs.