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What are narrow networks in health insurance?

A breif overview...
  • Insurance networks deliver benefits and services to plan subscribers
  • Narrow networks provide services and benefits at lower costs for insurers and lower prices for consumers
  • Narrow networks reduce the number of medical services providers to serve an insured population
  • Most Obamacare plans in 2017 use HMO managed care and narrow networks

Narrow networks are part of the trends in healthcare to trim expenses and focus the delivery of services on high-value medical providers. Most plans on the Obamacare Exchanges in 2017 have narrow networks; they consist primarily of HMOs with no outside network cost sharing.

HMOs restrict consumers to their network providers and do not offer cost-sharing for outside resources. The HMO model also emphasizes prevention and wellness. Prevention has the short and long-term effect of reducing demands for medical services.

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Narrow Networks Change Medical Practice

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The balance of participants in standard insurance plan networks changed with the enactment of the Affordable Care Act. The requirement for representation of the 10 essential health benefits and minimum essential coverage changed the balance of facilities, doctors, specialists that typically participate in an adequate network.

The trend towards narrow networks produces savings for insurers, but narrowing also changes the typical mix of network assets and resources. The National Association of Insurance Commissioners (the NAIC) has revisited its model legislation on the subject of network adequacy.

Insurance Networks

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Insurance providers build networks of medical care providers to deliver medical services to subscribers. These loose organizations or networks comprise the service capacity of a given plan. The network helps define the consumer experience for most subscribers.

Wide Networks are insurance plan networks designed to serve a diverse population in a defined geographic area. Medical service providers agree to perform for contract prices, and in return, they expect high volumes of patients.

Wide networks strike a balance between the customer’s need for convenient access to doctors and hospitals and the medical care providers interest in getting a large number of patients. For consumers, wait times are a significant factor particularly in acute illness situations.

Narrow Networks do not favor consumers beyond the issue of costs. For consumers, narrowing networks reduce their choices and add to the likelihood that they will not get the level of service that they expect.

Problems with Narrow Networks

Consumers tend to encounter difficulties in gaining access to services through narrow networks. In HMO plans, the Primary Care Physician can be a bottleneck in the flow of patients through the system. Some users report long waits for appointments and particularly unwanted waits for requests for acute illness.

  • Long wait times for appointment with PCP
  • Long wait times for specialists

Network Impact on Costs

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Public dissatisfaction with Obamacare stems from the conduct of for profit insurance companies that institute practices like the narrow network. Consider an insured person that finds that a needed specialty is no longer available on their plan.

The specialist may have been there in previous years; the plan may still list the specialist as a network resource. The consumer simply finds that phone calls don’t get answers, and the doctor is not taking more patients.

If specialists are not available on narrow networks, then the plans require additional spending for consumers. A simple fix in legislation or rule making, such as active purchaser oversight, could give public officials more control over the adequacy of networks.

Types of Managed Care

There are five widely used forms of managed care. The managed care distinction as to network size is sharply divided between the PPO type and the HMO type.

Primary Care Physician

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The primary care is the key to the managed care that uses a doctor to manage care and recommend referrals to network resources The PCP helps hold down network usage when contrasted with self-referral. Because of rationing by the PCP, the HMO model costs less than the PPO.

– The HMO Type

The Health Maintenance Organization model does not pay for services outside of the network. The restriction to network resources keeps the prices low. The EPO has the same policy — no cost-sharing for the use of out-of-network resources.

– The POS Network

The Point of Service type of managed care uses network resources with referrals. The primary care doctor rations services through direct care and referrals for other matters. The POS uses a narrow network and low prices as an incentive for subscribers.

The POS type does not pay outside sources. Users must look at their plan benefits; some POS plans will pay a small part of some outside services while others pay nothing.

– The HMO-POS Option

The HMO-Point of Service option uses a primary care physician but authorizes him or her to issue referrals to outside resources. When referred outside of the network, the consumer gets full cost sharing benefits. The POS option expands a narrow network on a case by case basis.

Networks with Self-referrals

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Self-referrals have the advantage of savings steps of approval and permission. Consumers must use their judgment to select specialists without the advice of a primary care physician.

– The PPO Types

The Preferred Provider network prefers in-network care by lower prices than with outside network sources. Consumers get less or even no cost sharing for outside resources. Consumers must prepare and file reimbursement claims when they go outside of the network.

– The EPO Network

The Exclusive Provider Organization uses a narrow network. The EPO offers lower prices, fewer copays, and lower coinsurance than other plan types as incentives. The EPO pays nothing for outside resources.

The FFFS Network

The Fixed Fee for Services plan uses the widest network since it is not limited by formal agreements with suppliers. The consumer can choose any medical care provider that accepts the terms of payment for services set by the payer.

The FFFS system resembles Original Medicare in that Medicare users can go to any provider that accepts Medicare. The medical care providers are constrained by the payer’s terms, but the consumer has wide freedom to choose.

Narrow versus Adequate Networks

In 2016, the Centers for Medicare and Medicaid began an effort to enforce higher standards and greater reliability in plan networks. The policy included findings that by approving incomplete networks, the CMS passed an opportunity to improve system performance.

The evidence showed that approving plans with incomplete networks could contribute to later customer dissatisfaction and plan failures.

The Centers for Medicaid & Medicare Services pays a stronger role in overseeing the adequacy of Medicare Advantage plan networks. The CMS requires a Specific undertaking to complete networks at prices equal to Original Medicare fees for comparable benefits or services.

Narrow Networks in Healthcare

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Insurers use narrow networks to reduce their costs and charge lower premiums than they do when using wide networks. Consumers can sometimes notice the difference in increased wait times and greater difficulty with appointments of all kinds. The federal government and the states, Medicare in particular, have begun to enforce better network standards

Comparison shopping is a helpful tool when selecting among Obamacare plans with narrow networks. One must be sure of particular facts such as nearby hospitals and lists of participating doctors and specialists.

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