Narrow Networks Caveat Emptor | Mercer US

Narrow Networks Caveat Emptor

Our Thinking / Healthcare /

Narrow Networks Caveat Emptor
Calendar16 September 2014

This article in The New York Times highlights that the same term, “narrow network,” is used to describe delivery systems that differ in important ways. This blurring of key distinctions may cause trouble for employers as they continue to evaluate and implement strategies to manage cost by improving health and outcomes.

Historically, insurance companies marketed narrow networks to employers that included fewer providers selected based on quality and performance criteria. Members were offered lower premiums as an incentive to try the smaller network. Fast forward to 2014. In developing cost-competitive products for the public exchanges, some insurance companies looked at their provider list, cut the top 25% most costly, and offered those remaining as a “narrow network” in the public marketplace. It is not hard to see that these two very different approaches to narrow networks manage cost but may not achieve the same consumer experience and satisfaction.

Now there is yet another type of narrow network -- Accountable Care Organizations (ACOs), that are intended to achieve better health outcomes, lower costs, and improve care coordination by offering incentives to groups of providers who collaborate on delivering high-quality, cost-effective care. With over 300 ACOs currently in the market, and hundreds of additional pilots being tested, the shift to incentives for providers to deliver on value is underway and is of keen interest to employers. ACO options are available through some insurance companies in certain geographies and some employers have entered into direct contracts with ACOs. When exploring narrow networks, be sure you understand the basis on which the network was developed and the provider reimbursement model.

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