“Narrow Networks” Are Critical Tool to Providing Affordable Care

The latest Republican attack on Obamacare centers around the use of “narrow networks” and what they characterize as President Obama’s “broken promise that you can keep your doctor if you like your doctor.”  The House Energy and Commerce Health Subcommittee held a hearing last month on the issue in their latest attempt to undermine the Affordable Care Act (ACA), asserting that consumer care is suffering.  Ezra Klein does an excellent job pointing out the hypocrisy of this latest attack in his December 2013 blog post so I will resist rehashing this well-documented pretense and, instead, focus on the policy justification for the role of narrow networks in the Exchange and the function they serve fulfilling the President’s promise of affordable coverage.

First, some context.  Narrow networks first came into existence during the managed care era of the 1990s as a way to control costs.  Employers demanded lower-cost options without any decline in quality. In response, plans offered networks of highly efficient providers that delivered quality care at the best price. And the trend continued with narrow network plans becoming increasingly popular well before the enactment of the ACA.  According to a study by the Kaiser Family Foundation, employer-offered plans with narrow networks grew from 15% in 2007 to 23% in 2012.

With the advent of the ACA and the market-based Health Exchange that relies on competition to drive down prices, they remain one of the only levers to do just that.

Health plans participating in the Exchange must meet a number of new established mandates that restrict their ability to vary plan design and control costs, including “essential health benefit” and preventive coverage requirements, limits on cost-sharing, and new restrictions on age-related premiums. Variation in network design is one of the only tools left for health plans to keep costs low for consumers.

Without this tool, premiums would certainly increase.  According to a recent study by McKinsey and Company, plans with broad networks cost an average of 13 to 17% more than those with narrow networks.  More than 70% of the lowest price health plan products are built around narrow, ultra-narrow, or tiered networks, many of which tout annual savings of as much as 25%.

And consumers clearly value having more affordable options.  A recent consumer survey conducted by the Kaiser Family Foundation found that people who are either uninsured or who currently purchase their own coverage are more likely to prefer less costly narrow network plans over more expensive plans with broader networks by a margin of nearly 20%.

But what about Republican claims that narrow networks under the ACA are hurting consumers?  There is little to no evidence of any connection between how much we pay for health care and the quality of the provider.  According to a recent RAND literature review, “[m]ost studies have found that the association between cost and quality is small to moderate, regardless of whether the direction is positive or negative.” Moreover, there are a number of protections already built into the law to ensure network adequacy.  Perhaps most importantly, they are not the only option available to consumers.  In fact, McKinsey found that plans with broad networks are available to close to 90 percent of the addressable population.

So while the Administration certainly has the authority to call Republicans’ bluff by exacting more prescriptive network requirements, they would surely drive up premium costs, ironically playing directing into the GOP narrative that the ACA is limiting consumer choice and driving up costs.

A more consumer-friendly approach would be to increase network transparency on www.healthcare.gov.  According to McKinsey, more than a quarter of consumers who enrolled in an ACA plan were unaware of the type of network they had selected.  This lack of awareness is clearly contributing to a perception that consumers are not getting what they thought they were paying for. The shopping portal has already seen a number of improvements.  Making it easy for consumers to search plans based on their providers would go a long way toward ensuring that consumers purchase the plan that best fits their financial and health care needs.

The ACA is the law of the land.  Rather than using networks as another politically expedient barb against the President, Republicans would better serve the American people by working with the Administration to find responsible solutions that do not undermine the delivery of affordable care.  In the words of Rep. Henry Waxman, “…regulators have an important balance to strike between broad access and affordability.  These challenges are nothing new.”

 

Stacey Rampy is a Democratic health care lobbyist and a founding partner at Rampy Northrup LLC.  She serves as the Executive Director of the Affordable Health Benefits Coalition (AHBC) which is holding a hill briefing on Health Care Premiums and Affordability on July 21st.

 

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