The Skinny on Narrow Networks in Health Insurance Marketplace Plans

Insurers can use narrow networks to lower premiums, but consumers have little information on the tradeoff between lower premiums and network size, and the potential financial burden of out-of-network care.

Researchers examined the increased use of narrow physician networks—or networks in which fewer than 25 percent of area physicians are covered—which have become popular under the Affordable Care Act (ACA). This brief is the first analysis of narrow networks to include data on individual physicians, as opposed to previous analyses that only explored the number of hospitals covered.

The Issue

Narrow networks are increasingly used as a cost containment strategy with the implementation of the Affordable Care Act, but consumers have little to guide them on the tradeoff between lower premiums and network size when shopping among the various plans offered through the ACA marketplace.

Key Findings

  • The “narrowness” or size of a network can be quantified, and 41 percent of silver plan physician networks in the ACA marketplace are small or extra small.

  • While consumers are likely to select plans with low premiums, they are not fully aware of the characteristics of narrow networks.

  • Well-functioning narrow networks will survive only if their characteristics are communicated more clearly to consumers and they are regulated to ensure adequacy.

Conclusion

The authors conclude that networks can be measured in a way that can be useful for consumers and regulators alike, and that presenting this information in consumer-friendly ways that make network distinctions clear and meaningful could ultimately improve health insurance coverage and health care access.

About the Grantee

The Leonard Davis Institute of Health Economics (LDI) is the University of Pennsylvania’s center for research, policy analysis, and education on the medical, economic, and social issues that influence how health care is organized, financed, managed, and delivered.