Getting narrow networks right could be the key to coverage expansion

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Narrow networks allow health insurers a way to offer lower-premium plan options on the public exchanges, so if implemented successfully, they may offer the best avenue to expand insurance coverage, a new study finds.

The Health Affairs study, which examined Affordable Care Act marketplace plans, confirmed that plans with smaller networks have lower monthly premiums than their larger-network counterparts. Consumers in the largest networks saw 13 percent higher premiums than those in the smallest, and savings decreased with the size of the network to the point where premium differences became insignificant as networks reached “medium” size.

Insurers see the use of narrow networks as a way to deliver greater value to consumers through lower premium costs. The study’s authors point out that consumers need to enter such networks fully aware of the potential consequences of a smaller network. Consumers who prioritize price above all other elements of their plans may wind up choosing a plan without understanding its breadth, leading to unwelcome surprises down the road, such as expenses for services from out-of-network providers.

Given that narrow networks represent one of the few viable strategies for insurers to offer low-cost plans, the authors suggest the future success of coverage expansion may hinge on successful implementation. Particularly, smooth implementation of the networks in ACA marketplaces could mean cost savings get passed on not only to consumers, but to taxpayers as well.

The complexity of enrollment choices makes this a knotty problem, according to the researchers, but also a critical one. “If narrow networks are to succeed as a strategy of offering products for price-sensitive consumers, it will be critical to improve transparency and address the hidden consequences for consumers who select narrow-network plans,” they write.