Narrow networks: The time is right

In 2010 (Narrow networks. Nice idea but no panacea) I described how some health plans were trying to hold down premiums by limiting the providers who were included. At the time I wrote that narrow networks had serious limitations that prevented them from being a very important part of the solution to health care cost pressures. I reread that post earlier this week when a reporter from New Hampshire called to discuss Harvard Pilgrim’s new narrow network plan that’s being introduced there.

When I did I realized that there have been enough changes in the environment that the six cautions I laid out then no longer apply to the same extent. I mentioned the patient backlash against tightly managed HMOs in the 1990s, the challenges of keeping patients in network, providers’ abilities to make up for price cuts by increasing volume, the focus on hospitals as opposed to physicians, lack of influence by national health plans in local markets, and ability of multi-region providers (like certain hospital chains) to retaliate against health plans.

While these issues are still real (especially the last two), the others are less of an issue. Why? Well, the Affordable Care Act has laid the foundation for providers to form Accountable Care Organizations for Medicare that can be equal or more effective with commercial plans, which have the power to compel their members to limit themselves to specific providers. That addresses the out-of-network issue and lack of inclusion of physician offices. The ACO structure also encourages an emphasis on quality, not just cost. And capitation and other forms of risk sharing make physicians and hospitals think twice about pumping up the volume.


By David E. Williams of the Health Business Group.

September 11, 2013

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