Narrow networks sparked consumer angst and new government oversight after the Affordable Care Act's first open enrollment period. But now, there's evidence that limited networks can be a win-win, albeit with one primary caveat.
A study of a narrow network incentive program in Massachusetts' employee health plan, where public workers received premium discounts if they opted into limited provider networks, has found a reduction in overall spending and utilization of hospital and speciality care, without adverse impacts to access.
The study, by MIT economist and ACA architect Jonathan Gruber and Wellesley College economist Robin McKnight, examined claims data for Massachusetts government employees from 2009 and 2012, comparing those who opted into the limited network incentive program in 2011 to those who kept the broad network.
Ten percent of eligible employees opted into the program and received a three month premium holiday in exchange for limited hospital and specialist networks, which amounted on average to a 36 percent annual reduction in out-of-pocket premium costs.
Those "who switched spent considerably less on medical care," with overall spending reduced by nearly 40 percent, they found, published their results in the National Bureau of Economic Research.
"The reduction in spending came entirely from spending on specialists and on hospital care, including emergency rooms," the write. In particular, enrollees in the limited networks had 45 percent less spending on specialty care.
Trips to primary care doctors actually rose among those in the limited network plans -- with primary care spending increasing by 28 percent. But that was outweighed by the reduction in speciality and acute care.
While the most healthy consumers are the most price sensitive, and thus most likely to opt into limited network incentive programs, the the adverse selection in Massachusetts' public benefits program was modest, Gruber and McKnight write.
"We also found that the positive effects on primary care and reductions in spending on specialist/hospital care occur for both more and less healthy patients, and that the spending reduction holds for a broad spectrum of illnesses," they write.
"The basic results hold even for the sickest patients, suggesting that limited network plans are saving money by directing care towards primary care and away from downstream spending."
But insurers managing limited and tiered provider networks should consider keeping broad networks of primary care doctors, if the data from Massachusetts is a good indicator.
The most savings in the Bay State's public employees program were associated with workers who kept their established primary care physicians when they switched to the limited network plans -- suggesting that networks with narrow selections of primary care providers "may fare less well than those that impose only stronger downstream restrictions," Gruber and McKnight argue.