States largely ignoring network inadequacies

Urban Institute
September 2014
Implementation of the Affordable Care Act: Cross-Cutting Issues
Six-State Case Study on Network Adequacy
By Sabrina Corlette, Kevin Lucia, and Sandy Ahn

During the transition to new health plans and new marketplaces under the
Affordable Care Act (ACA), many insurers revamped their approach to
network design, and many now offer narrower provider networks than they
have in the past. In this study for the Robert Wood Johnson Foundation's
project to monitor ACA implementation, researchers assessed network
changes and efforts at regulatory oversight in six states: Colorado,
Maryland, New York, Oregon, Rhode Island, and Virginia. Researchers
found that insurers made significant
changes to the provider networks of their individual market plans, both
inside and outside the marketplaces, and that insurers took varying
approaches to network design. Across all six states, insurers and state
officials alike reported consumer and provider confusion about which
plan networks included which providers, but most have received few
consumer complaints about their ability to obtain in-network services.
While three of the six states have taken action to improve provider
directories, it appears unlikely that state legislatures, officials and
regulators will dramatically change network adequacy standards, at least
in the short-term.

Conclusion

Insurers have used—and are likely to continue to use— network design to
curb costs and offer customers a more affordable premium. This was a
clear trend in the individual market as insurers approached the 2014
plan year, and some of our informants believe it will soon extend to the
group market as employers look for ways to reduce premiums. However,
despite concerns among some regulators, consumer advocates, and
providers that overly narrow networks could harm quality of care and
place consumers at significant financial risk, most of our study states
are not planning to significantly change their oversight of plan
networks. Though consumers reported problems with inaccurate provider
directories and a lack of consumer-friendly, comparable information
about the scope of plan networks, only half of our study states report
requiring insurers to improve the information made available to
consumers. At the same time, state officials and insurers also reported
that consumers were generally not complaining about difficulty obtaining
needed care from providers. Consequently, most state legislatures,
officials and regulators are unlikely to change network adequacy
standards, at least in the short-term.

http://www.urban.org/UploadedPDF/413240-Six-State-Case-Study-on-Network-Adequacy.pdf

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Comment by Don McCanne

Private insurers use narrow networks of physicians and hospitals so that
they can negotiate more favorable provider rates which then supposedly
allows them to keep their insurance premiums more competitive. The
trade-off is that patients lose their choice of providers and increase
the risk that they will suffer severe financial penalties because of
unavoidable circumstances wherein care is obtained out of network, or
worse, care is not received at all because of impaired access.

The use of narrow networks will cause harm to many patients. Yet,
according to this report, for the present, "most state legislatures,
officials and regulators are unlikely to change network adequacy
standards." Also, although provider directories are notoriously
inaccurate, "only half of our study states report requiring insurers to
improve the information made available to consumers."

How much do the insurers really save by using narrow networks? The
savings is not the difference between the prices specified by the
providers and the amount contracted with the narrow network providers.
Insurers already receive sharp discounts from the providers in their
broad networks. So the savings is only the very modest additional amount
squeezed out of those who contract for the more exclusive narrower
networks. That savings is surely not worth the impaired access, loss of
choice, and potential financial hardship brought by narrow networks.

With a single payer system, fair payments apply to all physicians and
hospitals, therefore there is no need to establish separate networks.
The one network is the entire health care delivery system (except for
those who choose integrated delivery systems such as Kaiser Permanente).
Government administered pricing is far more patient friendly than
market-based manipulations, and isn't the patient what it is all about?