Massachusetts' Foray Into Narrow Networks Shows Potential

The narrow health insurance networks that have become more common under the Affordable Care Act can reduce patient spending by as much as a third, according to research from MIT.

Economist Jon Gruber found that the limited choices provided by narrow networks led to patients using more primary care and going to the emergency room less, reported Vox. Costs were down because the providers contracted with narrow networks tended to charge lower prices.

Typically, narrow networks are not popular among consumers. California’s state legislature recently approved a bill that would require insurers to prove they are providing sufficient coverage. The legislation was in response to a lawsuit from disgruntled patients alleging Anthem Blue Cross and Blue Shield of California misled consumers about the provider networks.

However, Massachusetts’ foray into narrow networks revealed their potential. In 2011, the state offered 3 months of free premiums to employees who switched to a limited network. Gruber and coauthor Robin McKnight studied both those patients who switched to narrow networks and those who did not from 2010 to 2012.

Narrow networks were offered prior to 2011, but with the financial incentive, the number of employees who switched increased by 11 percentage points. Those who chose to a limited network spent an average of 36% less on healthcare spending, according to Gruber and McKnight’s research.

Patients on narrow plans used less medical care. Although they spent 28% more on visits to primary care physicians, specialty care costs were down by 45%. Patients who switched to a narrow network went to the emergency room less—likely because they were closer geographically to their primary care physician—and got fewer x-rays and scans.

Although patients may have been concerned that cheaper hospitals and providers may not be offer good care, this was not the case in Massachusetts, according to Gruber and McKnight. There was no significant difference in quality between hospitals inside and outside of narrow network plans.