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The Effect of Narrow Network Plans on Out-of-Pocket Cost
Emily Meredith Gillen, PhD; Kristen Hassmiller Lich, PhD; Laurel Clayton Trantham, PhD; Morris Weinberger, PhD; Pam Silberman, JD, DrPh; and Mark Holmes, PhD
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The Effect of Narrow Network Plans on Out-of-Pocket Cost

Emily Meredith Gillen, PhD; Kristen Hassmiller Lich, PhD; Laurel Clayton Trantham, PhD; Morris Weinberger, PhD; Pam Silberman, JD, DrPh; and Mark Holmes, PhD
The authors examined the effect of narrow network plan selection on beneficiariesí outpatient visits and outpatient out-of-pocket expenditures in the 2014 nongroup health insurance market.
Although premiums increased between 2013 and 2014 for both individuals who selected narrow network plans and those who did not, 2014 premiums were 10% lower for individuals in a narrow network plan than for individuals in a broad network plan. These numbers reflect the 2014 premiums before APTCs were applied. Individuals on narrow network plans were more likely to have an APTC (58.3% vs 41.2%; P <.0001); on average, their APTC was 27.5% higher ($213 vs $167; P <.0001) compared with individuals in broad network plans.

DID Results 

Table 3 shows the results of our DID model. After controlling for preperiod differences and adjusting for risk and other variables, we found the effect of narrow network plan selection on outpatient visits to be statistically insignificant. After controlling for observable characteristics and any extemporaneous changes, we also found no significant change in outpatient OOP expenditures for individuals who self-selected narrow network plans.

DISCUSSION

Narrow network plans were popular choices for consumers in the first year of the health insurance marketplaces. Although there was heterogeneity in the creation and execution of narrow network plans, the underlying concept was a product with lower premiums, which incentivized beneficiaries to visit a specified set of providers or face a higher cost for services. To date, few studies have been conducted on the effects of narrow network plans on costs and utilization in the nongroup market.15 The results from our study support the idea that individuals who select narrow network plans can save money without reducing the number of outpatient visits. 

Although the DID model did not find a significant reduction in outpatient expenditures, individuals in narrow network plans did not incur higher adjusted expenditures as a result of the narrow network, indicating that they were not obtaining out-of-network care (purposively or inadvertently). Individuals in narrow network plans who visited in-network providers incurred lower OOP costs for their visits and, by plan design, had lower monthly premiums, which could decrease overall costs throughout the year.

Early reports suggested that individuals chose narrow network plans because of the lower plan premiums, and our results provide support for this finding.1,2 In this sample, the individuals who selected narrow network plans had lower unadjusted premiums the year before narrow network plans were offered; the 2013 unadjusted average monthly premium for the narrow network group was 27.3% lower than the average for the broad network group. The 2013 premiums were medically underwritten, which means that lower premiums may have been a function of a healthier population; however, a higher percentage of individuals in narrow networks had deductibles over $5000 in 2013 (34.3% vs 26.6%), indicating that individuals who selected narrow network plans had a history of choosing health plans with lower premiums but more cost-sharing restrictions.

Although individuals in the narrow network group had fewer unadjusted outpatient visits in both 2013 and 2014, joining a narrow network plan did not lead to any statistically significant changes in the mean number of outpatient visits, providing support that narrow networks did not decrease overall utilization. This is consistent with the objective of narrow network plans: to steer individuals toward in-network providers, rather than reduce utilization.

Limitations

This study was conducted with 1 insurer, which limits generalizability; this could be nontrivial because of the wide heterogeneity in narrow network plans nationally and the variation in implementation.16,17 However, the insurer in this study had a significant share of the state’s nongroup health insurance beneficiaries, which makes this study generalizable within the state.9 Second, we focused only on outpatient provider-based visits because they are more actionable, in that people have more ability to make decisions about where to go. However, we do not know the effect of narrow networks on ED or inpatient visits. Third, the sample for this study comprised individuals who were continuously enrolled with this same insurer in 2013 and 2014. Due to the inclusion criteria of 12 months of 2013 enrollment, the average income level of the sample was higher than the average income of the total population of individuals enrolled in QHPs in 2014. The higher income is evidenced by the lower percentage of individuals in our sample with an APTC (41.2%-58.3%) compared with the national average (86%) (Table 1).18 The results of this study may not apply to individuals who were new to health insurance in 2014. 

In posthoc analyses (not shown), we found that individuals with higher expected health expenditures, higher incomes, or a general preference for more generous insurance coverage had lower odds of selecting a narrow network plan in 2014. Because of these associations, we want to underscore that, in this study, all individuals in narrow network plans actively selected a narrow network plan in 2014. Individuals who self-select into a narrow network plan may differ from individuals who do not do so in unmeasured ways (eg, they may be more prepared for, or aware of, narrow network plan guidelines), and as such, they might respond to plan incentives differently than individuals who did not select a narrow network plan. The findings from this study could differ if individuals were forced into narrow network plans (eg, if insurers limited the availability of broader network plans).

CONCLUSIONS

Heath insurance premiums and healthcare expenditures are projected to rise, and narrow network health plans are a mechanism that insurers are using to control costs.19 These health plans offer lower premiums and, in return, individuals are incentivized through cost sharing to visit certain providers and facilities. Narrow network implementation was heterogeneous throughout the country, with varied levels of success, but the rising popularity of these products suggests issuers may continue to experiment with restricted provider networks.

In this study, we found that self-selection in a narrow network health plan had no statistically significant effect on the number of outpatient visits or on the outpatient OOP expenditures associated with those visits. Utilizing in-network care is imperative for lowering OOP costs on a PPO; individuals on narrow network plans under this particular insurer were able to adhere to plan incentives and therefore were able to enjoy lower premiums without higher expenditures from out-of-network care. To ensure that individuals in narrow network plans continue to comply with plan incentives and visit participating providers, more transparency about provider and facility participation in narrow networks may be necessary.6

Author Affiliations: Department of Health Policy and Management, Gillings School of Public Health, University of North Carolina – Chapel Hill (EMG, KHL, LCT, MW, PS, MH), Chapel Hill, NC; Blue Cross Blue Shield of North Carolina (EMG, LCT), Durham, NC.

Source of Funding: None. 

Author Disclosures: Drs Gillen and Trantham were employed at Blue Cross Blue Shield North Carolina at the time this research was conducted. The remaining authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article. The Blue Cross and Blue Shield of North Carolina Foundation has previously made charitable donations to the University of North Carolina, including, for example, for naming rights to an auditorium.

Authorship Information: Concept and design (EMG, KHL, MW, MH); acquisition of data (EMG, KHL, LCT); analysis and interpretation of data (EMG, KHL, LCT, MW, PS, MH); drafting of the manuscript (EMG, MW, PS, MH); critical revision of the manuscript for important intellectual content (EMG, KHL, LCT, MW, PS); statistical analysis (EMG); and supervision (EMG, KHL). 

Address Correspondence to: Emily Meredith Gillen, PhD, RTI International, 3040 E Cornwallis Rd, PO Box 12194, Research Triangle Park, NC 27709. E-mail: egillen@rti.org. 
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17. Giovannelli J, Lucia KW, Corlette S. Implementing the Affordable Care Act: state regulation of marketplace plan provider networks. The Commonwealth Fund website. http://www.commonwealthfund.org/publications/issue-briefs/2015/may/state-regulation-of-marketplace-plan-provider-networks. Published May 2015. Accessed August 17, 2017.

18. Health insurance marketplace: summary enrollment report for the initial annual open enrollment period. Office of the Assistant Secretary for Planning and Evaluation website. https://aspe.hhs.gov/system/files/pdf/76876/ib_2014Apr_enrollment.pdf. Published May 1, 2014. Accessed August 17, 2017. 

19. Updated budget projections: 2015 to 2025. Congressional Budget Office website. https://www.cbo.gov/publication/49973. Published March 9, 2015. Accessed August 17, 2017.
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