Tiered and narrow insurance network products are increasing in US health insurance markets, particularly in the health insurance exchange market, according to an analysis by Avalere Health.
Network design is a key part of health benefit design and figures strongly in health policy debates that revolve around the goals of enhancing clinical quality and improving the patient experience while lowering the total cost of care.
A new analysis of tiered and narrow insurance network designs by Avalere Health consultants found that tiered and narrow insurance network products are increasing in US health insurance markets, particularly in the health insurance exchange market, and are being offered by national and regional health insurers. Approximately 17% of employers are offering tiered networks—which are less restrictive than narrow networks and offer consumers financial incentives to seek care with preferred providers—in their largest plan by enrollment; the prevalence of these networks increases for the largest employer groups offering health benefits (24% of employers with more than 200 employees). In the northeast US, the percentage of employers offering tiered, high-performance network has increased from 15% in 2007 to 27% in 2014.
In 2015, approximately 7% of surveyed employers offered health benefits in a narrow network plan, which limits the number of providers who can participate in order to reduce costs. However, in the individual market, narrow networks represent a significant portion of plans offered in the insurance exchanges. The 2015 exchange market showed that the average provider network for plans offered on the exchanges created by the Affordable Care Act (ACA) include 34% fewer providers than the average commercial plan offered outside the Exchange.
Avalere’s analysis, commissioned by Horizon Blue Cross Blue Shield of NJ, examined evidence about the effects tiered and narrow network design have on improving care and containing costs. Recently, Horizon Blue Cross Blue Shield of New Jersey joined other large insurers in the state by introducing its a statewide tiered network in the commercial health insurance market, OMNIA Health Alliance. OMNIA operates in the individual, small group, large group, fully insured, and self-insured markets.
The Avalere analysis found that tiered and narrow networks are related but distinct, and both models can be created based on provider performance. Market and regulatory forces driving the development of these network designs are: cost growth; consumer preferences; variation in provider quality, pricing, and healthcare spending within local markets; provider/insurer concentrations in local markets; local market activity in Medicare and Medicaid; and effects of the ACA.
Avalere’s analysis suggests that tiered and narrow networks are promising in terms of reducing costs: “Tiered and narrow networks can drive premium reductions of 5% to 20% or more when compared with broad, open access plans.”
However, additional research is needed to examine the impact on quality and clinical outcomes of patients enrolled in tiered and narrow insurance networks. Patient access to care in tiered and narrow networks requires the careful attention of insurers and providers to safeguard against care disruptions, Avalere notes.
“Too narrow of a network can potentially reduce or delay access, or lead to significant out-of-pocket costs for consumers. Ensuring access to care in tiered and narrow networks is particularly important for those patients with significant health needs,” the report states.
For example, a national study of cancer centers found that half of centers reported individual exchange plans in their state have tiered provider networks with differential enrollee cost-sharing at each tier, and most of the cancer centers reported falling into only the higher tiers of cost sharing.