Health Insurance Shoppers Look to Limited Networks to Save Money

In all the turmoil in health care, one surprising truth is emerging: Consumers seem increasingly comfortable trading a greater choice of hospitals or doctors for a health plan that costs significantly less money.

“Are they willing to trade choice and access for price? There’s no question about that,” said Mark Newton, the chief executive of Swedish Covenant Hospital, a Chicago hospital that recently teamed with an Illinois insurer, Land of Lincoln Health, to offer a health plan.

This year, nearly half of the plans offered on public health care exchanges are so-called narrow network options, which sharply limit the medical providers whose services will be covered, new data shows. Furthermore, nearly a fifth are considered “ultranarrow networks,” which offer even fewer choices. At the same time, more employers are also embracing the plans for their workers, largely as a way to lower health care costs.

The data, gathered by the McKinsey Center for U.S. Health System Reform, is significant, given early criticism from some providers and patients who reacted to these plans last year by arguing they were like the overly restrictive health maintenance organizations, or H.M.O.s, of the 1990s, which were ultimately rejected by consumers.

The financial strategy is relatively simple. Insurers say one way to lower the price of a plan is to limit the number of hospitals and doctors in their networks. They can then ask providers to discount their prices in return for a potentially higher volume of patients; some also say they are trying to pick a select group that provides better care.

But consumers can find themselves responsible for high bills if they do not understand how the plans work or which providers are included in the network — as was often the case during the first year of the federal law. If they go to a specialist or hospital whose services are not covered by a narrow network plan, they face paying the full cost of the care.

The percentage of narrow networks this year is about the same as last year. McKinsey, which looked only at the hospitals included in a network, considers a plan to have a narrow network if anywhere from 31 to 70 percent of the hospitals in a geographic region participated. An ultranarrow plan includes 30 percent or fewer.

Still, there’s no denying the attraction of low prices for some consumers. Andrew Kalish, who, along with his wife, Gina Marino-Kalish, runs a small business, the Ravenswood Event Group, jumped at the chance to enroll in a plan that featured Swedish Covenant and its doctors. While he likes the fact that his wife and son can go to other doctors if the family is willing to pay more, he believes the care at Swedish to be high quality, even compared to some of the city’s better-known academic medical centers. The plan he chose for the company will also save $1,300 a month. “It was pretty much what I wanted,” he said.

These narrow-network plans have generally remained the least expensive, according to McKinsey, which found that 70 percent of the lowest-priced plans for 2015 were based on narrow networks of hospitals. They also had much lower rate increases in 2015, with a median increase of 4 percent, about half as much as broader plans.

“The marketplaces were working the way they were intended to work,” said Sabrina Corlette, a researcher at Georgetown University’s Center on Health Insurance Reforms. “Narrow networks are not going away.”

The Land of Lincoln plan, a consumer-oriented co-op, has found a sort of middle ground in the narrow-network world. By teaming with eight specific providers, including Swedish Covenant Hospital, to offer new health plans for 2015, it was able to lower the prices by 20 percent from the plans it had last year. Enrollment increased significantly in 2015, from just 3,800 to more than 50,000 consumers.

Customers in the plan also have access to a broader network if they are willing to pay more. Some other restrictive narrow-network plans will not pay anything for out-of-network care.

“We kind of view these as the antidote to narrow networks,” said Jason Montrie, the president of the co-op.

While small employers have generally been more willing to offer plans with narrow networks because of their low prices, large employers are also becoming interested. Many are still resistant to the idea because of concerns about whether the narrow networks offer enough high-quality hospitals and specialists, but they have turned to them when they think the plans can deliver better care at lower costs. In 2008, 21 percent of the very largest employers offered what the consultancy Mercer called high-performing networks, in contrast to 30 percent today.

After some initial confusion about the plans when they made their debut on the public insurance exchanges, many consumers appear to be satisfied with their care. Pequita Sissom, a 64-year-old in Eckerty, Ind., said she was not having any trouble finding doctors or hospitals who participated in the Anthem plan she selected from the exchange. When she first signed up for coverage for 2014, “it wasn’t clear,” she said. “They had people listed in network who turned out not to be.” This year, she said, “has gone a lot smoother.”

Consumers who chose narrow-network plans have mostly stayed with them, according to McKinsey, which surveyed people who bought coverage last year. “You didn’t see a wholesale switching out of narrow into broad,” said Erica Hutchins Coe, a McKinsey expert who was an author of the new analysis. Only 17 percent of the people McKinsey surveyed changed plans to a broader network.

Some narrow-network subscribers say they did not understand exactly what they were choosing. Ramon Cinco, a Houston schoolteacher, picked an Aetna plan for his family only to discover that it included only a narrow slice of providers near him. “People don’t stay inside the county limits,” he said.

In choosing a plan for 2015, he and his wife “ended up spending a lot of time, days, doing research,” he said. They changed to a Cigna plan with a much higher deductible whose network included well-regarded institutions like Texas Children’s and Houston Methodist.

Insurers have always been mindful of possible criticism, similar to that in the early 1990s, and the rollout of the plans last year led both consumers and regulators to complain that people were not always told clearly about the plans’ limitations.

“There was a lot of trepidation right around the launch of the public exchanges and the narrow networks,” said Colin Drozdowski, an executive with Anthem, a large for-profit insurer that drew heavy criticism for some of its plans.

But much of the initial concern seems to have dissipated. “The noise and clamor from the regulators, from employers and employees, has lessened significantly,” he said.

Regulators and consumer advocates continue to press insurers to be clearer about who is in the network and make sure patients have no problem seeing the right doctor.

“This is going to be a work in progress for years,” said Mike Kreidler, the insurance regulator for Washington. The state was in the forefront of adopting strict rules over exactly how narrow a network could be, and the National Association of Insurance Commissioners, which represents the state regulators, is working on its own recommendations.

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