To compete on premium price in a post healthcare-reform market, insurers need to reduce the amount they pay providers for services delivered to members, according to a Health Affairs blog post.
Payers have been turning to controversial narrow provider networks to do this--using the most cost-efficient providers or offering provider rebates linked to the medical-loss ratio.
Under the first narrow network implementation strategy, payers contract with the lowest-cost providers and focus entirely on cutting unit cost. The American College of Physicians (ACP) criticized this approach and proposed new standards to assess provider network adequacy, including patient-to-physician ratios and use of out-of-network providers as indicators of access. Moreover, the ACP said insurers should be required to explain why they drop providers from their networks, as FierceHealthPayer previously reported.
The second network narrowing strategy involves insurers offering payment incentives to limited-network providers for meeting quality measures and delivering care below the insurer's required medical-loss ratio target. This strategy addresses both unit costs and quality of care, Health Affairs noted.
But while moving away from open provider networks may curb costs, insurers must balance narrow networks against consumer needs for healthcare access and provider choice, according to Health Affairs. Health insurance exchange shoppers have expressed willingness to accept less provider choice in exchange for lower premiums.
Nevertheless, Anthem Blue Cross Blue Shield has come under fire for dropping nine New Hampshire hospitals from its individual market provider network. Without a narrowed network, premiums could rise up to 40 percent, Anthem Senior Public Relations Director Christopher Dugan told Foster's Daily Democrat. He emphasized that the network reduction had no effect on 90 percent of Anthem's customers and that the company's individual plans include out-of-network coverage for emergency care.