Many Physicians Are Cut Out
Narrow networks, which seem ready to spread to new markets, can be alarming for physicians because these insurance products typically cut out large swaths of doctors and hospitals so that they can deliver a reduced premium.
For example, narrow networks run by Medicare Advantage plans typically exclude almost one half of physicians,[1] and a widely used definition of “narrow” is that at least 30% of hospitals are excluded.[2]
The usual goal is to deliver big savings for patients in terms of premiums and out-of-pocket costs. In a recent study, narrow networks were 16% cheaper than other offerings in state health insurance exchanges.[3] And in Massachusetts, some narrow networks in the group insurance market have been priced a staggering 30%-40% less than standard networks.[4]
So far, however, narrow networks have not substantially affected many physicians. That’s because they are still mostly limited to Medicaid plans, policies on the insurance exchanges, and Medicare Advantage plans—and they generally can’t be found in the huge employer-based market.
That may be changing, however. There are signs that employers are beginning to embrace narrow as a better alternative to the other major cost-saving approach, high-deductible plans, which many patients despise.
Meanwhile, insurers are launching narrow plans in exclusive relationships with large health systems or accountable care organizations (ACOs), and try to produce shared savings by applying value-based principles.
Pitfalls for Physicians
When large numbers of physicians are excluded from an insurance network, things can go wrong. Physicians may not be told they are excluded, and if they are told, they may not be told why, or get any data to dispute their exclusion.
Many narrow plans do not pay out-of-network physicians or even tell these physicians that they are out-of-network. In these cases, physicians may unknowingly treat a patient in a narrow network and find out they won’t be reimbursed at all.
Some insurers use a somewhat less onerous variation of narrow networks called “tiered networks.” Physicians who are deemed more costly are relegated to a higher-cost tier. Since patients have to pay more to see these doctors, they are much less likely to choose them, so the tiered network operates much like a narrow network.
Narrow plans often insist that they put quality first, but in many cases, their main goal is reducing costs. A 2015 report by the Robert Wood Johnson Foundation found that “price was the determining factor for whether a provider was included or excluded from most networks.”[5]
What’s more, plans’ evaluations of physicians, based on the costs they generate, are often flawed. According to a 2010 study of plans, nearly one quarter of all physicians were misclassified on their use of resources, and that figure rose to two thirds in some specialties.[6]
When physicians know the patient’s status in advance, they often may be able to request prior authorization to get paid, but this involves a great deal of red tape.
‘Narrow Networks’ Are Slowly Starting to Spread
Now, however, the narrow business proposition—to exclude many physicians and hospitals in favor of a few—is being applied to new products in the broader insurance market. For instance, some insurers are launching plans built on exclusive relationships with large health systems and ACOs. These are limited only to doctors within those organizations.
Are Too Many Doctors Being Excluded?
Howard Chen, MD, a solo ophthalmologist in Goodyear, Arizona, has dealt with several narrow plans in the area and thinks many of them have gotten too narrow. “They seem to be gaming the system by making the network so narrow that it’s difficult for patients to get in to see a doctor,” he says.
When is a network so narrow that patients are effectively locked out? No federal or state regulator has clearly defined what proportion of physicians a network should have, which is called “network adequacy.”
Under this concept, a network should have a sufficient number of physicians to cover its members, and these physicians should be nearby. But how nearby? Acceptable driving distances vary between rural and metropolitan areas. And should specialists be as accessible as primary care physicians?
Patients are sometimes misled by inaccurate plan directories that list physicians who aren’t actually in the network, or physicians who won’t take any new patients. In a 2014 audit of Anthem’s exchange networks by California authorities, 12.5% of listed physicians were not practicing at the listed location and 12.8% were not accepting the plan’s members.[7]
Another problem with narrow networks is that patients are often confused about their status, and Chen suspects this is also intentional. “Patients are kind of tricked,” he says. “It’s not been made clear to them that they can’t just see any doctor they want. When they find out they can’t come to my office, they’re surprised. It happens all the time.”
Indeed, patients are confused. A 2015 study found that almost one half of consumers who had just switched to narrow networks were unaware of the network configuration associated with their plan.[8]
“In my opinion, there isn’t anything good about narrow networks,” Chen says. But he isn’t shunning them, because he wants to keep his referral relationships strong. Looking for plans that pay relatively well, he has joined at least five narrow plans.
Chen says he wouldn’t have been able to get into narrow networks as a solo specialist, so he gained entry through memberships in an independent physician association and several ACOs.
But he still has problems with these networks. Many of the ophthalmology subspecialists to whom he refers patients are out-of-network. The narrow plans will allow these referrals, but only after a lengthy prior authorization process.
“They make it very hard,” he says. “Sometimes they flat-out deny the request.” When that happens, he has to get the patient involved, and the request is usually approved.
Should Doctors Pay More Attention to Narrow Networks?
The traditional markets for narrow networks are not exactly a must-have for many physicians.
Narrow plans cover one third of Medicaid recipients,[9] three quarters of the plans on the Affordable Care Act (ACA) exchanges,[10] and roughly 10% of the members of Medicare Advantage plans. (That is, about one third of Medicare beneficiaries are in Medicare Advantage,[11] and about one third of Medicare Advantage enrollees are in narrow-network plans.[12])
In contrast, narrow networks have been largely absent in employer-based insurance, which covers almost one half of Americans. (Exchange plans cover 2%-3%.) But as of last year, only 8% of employers offered narrow plans, the same level as in 2016.[13]
Employers have in the past sought to control expenses by raising deductibles rather than opt for narrow networks, But employees are souring on high-deductible plans, which force them to spend thousands of dollars out-of-pocket before their coverage kicks in.
In a recent survey of insured employees, two thirds of those who had chosen a high-deductible plan said they would drop it next year, and almost one half of all covered employees would select a narrow network plan if it provided access to quality providers.[14]
“Narrow networks are catching on with employers, especially small employers,” says Jonathan Gruber, PhD, an economics professor at the Massachusetts Institute of Technology who studies the phenomenon. “You’re starting to see a narrow plan as one of the options.”
Remember the 2014 Backlash Against Narrow Networks?
Narrow networks have been around for decades, but they entered many people’s consciousness only in 2014. Newspaper articles focused on their abuses, doctors and patients sued them, and state legislators introduced a rash of new bills designed to restrict them.
The fact that this happened in 2014 was due a convergence of two events.
On the exchanges, which started in 2014, plans needed to sell insurance to price-sensitive consumers who often were previously uninsured, so they did not have a regular doctor they wanted to keep. ACA restrictions barred plans from lowering costs by cutting benefits, and the ACA’s vague rules on network adequacy made excluding providers the logical way to cut costs.[15]
At around the same time, narrow networks run by Medicare Advantage plans needed to cut costs because the ACA directed a 6.5% cut in federal funding to Medicare Advantage plans.[16] In late 2013, UnitedHealthcare, a major Medicare Advantage insurer, began cutting about 35,000 doctors across the country, representing 10% of its national provider network.[17]
In Connecticut alone, UnitedHealthcare terminated 2250 doctors from its Medicare Advantage plan, representing 22.5% of all practicing doctors in the state, according to data from the Fairfield County Medical Association. The county association sued UnitedHealthcare, claiming that the dismissals violated several provisions of doctors’ contracts with UnitedHealthcare.
After 2 years of litigation, a federal judge allowed the purged physicians to individually arbitrate their cases with UnitedHealthcare, at the physicians’ own expense.
“Dozens, if not hundreds, of physicians went into arbitration,” says Mark Thompson, chief executive of the county association. These doctors were not allowed to discuss the outcomes of their cases, but “afterward, there were a lot of physicians walking around with smiles on their faces,” he says.
On the other hand, some physicians apparently lost some cases, and many of those who won and were reinstated in network found out it was for the short-term. When these physicians’ contracts expired, UnitedHealthcare had the option of not signing them up again, Thompson says.
The standard advice for physicians excluded from networks is to ask the plan for the reasons why they were excluded and challenge those reasons, on the basis of specific data. However, UnitedHealthcare refused to say why the physicians were dismissed, which made it very difficult to challenge the plan’s decision.
Even when UnitedHealthcare officials were asked in court why they had dismissed the doctors, “they said they were not going to answer that question,” Thompson says. “And the judge accepted that answer.”
Even though UnitedHealthcare seemed to win in the long term, the media attention around the case was harmful for the company. Since then, Thomson thinks narrow plans have learned to be more discreet about cutting out doctors – removing a few at a time rather than all at once.
When Anthem dropped Connecticut providers from its Medicare Advantage narrow network in 2018, 156 physicians were dismissed, and many of those were not in Fairfield County, Thompson reports. His members decided not to file a lawsuit on behalf of such a small number of physicians.
Meanwhile, Medicare Advantage plans now are under less pressure to drastically cut physicians. The Trump administration has awarded Medicare Advantage plans pay increases of 2.95% in 2018 and 3.4% for 2019.[18]Medicare Advantage plans may not be carrying out big purges anymore, but neither, by all appearances, are they loosening their grip on tight narrow networks.
Specialists Are in Danger of Being Removed
The most excluded group of physicians in narrow networks are specialists—and subspecialists in particular. A 2014 study led by Gruber, the MIT professor, found that people who switched to narrow plans actually saw an increase in primary care services compared to their old plans, whereas reductions in spending came entirely from specialists and hospital care.[19]
Among hospitals, academic medical centers are affected the most, owing to their higher costs. A 2013 study found that in “ultra-narrow networks”—where 70% of local hospitals are shut out—only 35% included an academic medical center, compared with 94% in broad networks.[20]
Thompson says most of the Connecticut doctors dismissed in UnitedHealthcare’s purge were specialists. A dearth of specialists in that network meant that a patient in Stamford had to drive 40 miles to New Haven to see an in-network nephrologist, he reports. Nationally, a 2015 poll of emergency physicians showed that more than 80% were having difficulty finding specialists for patients in narrow networks.[21]
Some narrow plans have no doctors at all in certain specialties. A 2015 study found that 15% of exchange plans lacked a doctor in at least one specialty.[22]
The situation is even worse for subspecialties. For example, a recent study of exchange plans found that 43.8% had no available pediatrics subspecialists in the area.[23]
A list of doctors needed to meet federal network adequacy regulations includes many specialties, but most subspecialties are not on it, says Howard Rogers, a Mohs surgeon in Connecticut.
Mohs surgery, a branch of dermatology involving procedures for skin cancer, is not on the list, and it’s often hard to find such surgeons in narrow networks, according to Rogers, who is a trustee of the American College of Mohs Surgery.
When narrow plans use algorithms to evaluate the costs that physicians generate, Rogers says they count Mohs surgeons as dermatologists, rather than as a separate group. Because Mohs doctors perform relatively expensive surgery, they are treated as expensive dermatologists and removed from the network, he says.
Rogers met with the medical directors of several plans and with officials of Optum, maker of one of the most widely used algorithms, to show them why Mohs surgeons are more expensive and should be evaluated in a separate category from dermatologists. But none of them agreed to do so, he says.
Legislation Has Had Mixed Results
The media attention on narrow networks in 2014 spawned a variety of bills in state legislatures covering such problems as surprise medical bills, inaccurate directories, network adequacy, and physicians’ access to networks.
Surprise medical bills, a problem created by narrow networks, happen when one provider is in-network and another is out-of-network. When surgery is performed, an in-network surgeon’s bill would be covered, but not an out-of-network anesthesiologist’s bill.
California’s law on surprise medical bills, passed in 2017, requires plans to cover out-of-network physicians’ bills when the health facility where they work is in-network.[24]
The New Jersey version, passed in June 2018, requires the plan and doctors to go into arbitration to come up with an amount the insurers will pay. However, the state medical society opposed the New Jersey bill, because it was concerned that the amount the doctor is due would be knocked down significantly in arbitration.[25]
In the case of inaccurate directories, a major problem across the country, California, Georgia, New York, and Pennsylvania require restitution for consumers who relied on inaccurate directories when enrolling in plans or seeking care.[26]
Network adequacy, addressed in the ACA, is now left to the states. The Trump administration ceded regulation to the states in its final rules on exchange plans in 2017, according to a report by the Brookings Institution.[27] However, the report notes that almost half of states have no adequacy standards, and the standards that do exist do not set specific limits.
A new model act on network adequacy, issued in 2015 by the National Association of Insurance Commissioners, extends network adequacy to subspecialties.[28] Rogers says the Mohs Society lobbied to get it included, but few, if any states have passed the provision.
Many physicians would like to abolish narrow networks altogether and require plans to accept “any willing provider” who meets the plan’s clinical standards.
Many states passed any willing provider (AWP) laws when HMOs introduced restrictive networks in the 1990s, and AWP laws of one kind or another are still on the books in 26 states, including Illinois, Texas, Virginia, and New Jersey.[29] In 2014, in the middle of the narrow network backlash, voters in South Dakota made their state the 27th with an AWP law.
However, Thompson points out that state regulations, including AWP laws, don’t apply to Medicaid, Medicare Advantage, or large employers’ self-insured plans, which cover about one half of insured people.
The federal Medicare and Medicaid programs are exempt from state regulations, and self-insured plans are exempted under the Employee Retirement Income Security Act (ERISA). For example, the New Jersey bill, owing to ERISA, is only expected to affect about 30% of residents with employer-based insurance.[30]
The Next Step: Exclusive Narrow Networks
The next stage in the evolution of narrow networks involves insurers’ exclusive contracts with one health system. This totally changes the dynamic. When insurers contract with health systems, they no longer evaluate physicians for the network, and purges are not necessary.
An example of this arrangement is the BlueCare Direct HMO in Illinois, a narrow network established in 2015 as an exclusive partnership between Blue Cross Blue Shield of Illinois and Advocate Health Care, the largest health system in Illinois.[31] (The offering is classified as an HMO for regulatory purposes, but it does not use gatekeepers or usually require approvals for referrals, as HMOs do.)
Unlike a typical scanty narrow network, BlueCare has a robust network that includes all the specialists in the Advocate system. Every physician in the system is automatically part of the network, rather than being individually evaluated.
This sort of protection of physicians within a group is already an aspect of traditional narrow networks. That’s how Chen, the solo ophthalmologist, got entry into five narrow networks. Even Rogers, the Mohs surgeon, is in UnitedHealthcare’s narrow network because he is part of a larger dermatology group.
Rather than being identified as too expensive, Rogers says his higher costs are mixed in with the lower costs of general dermatologists in his group. Rogers’ group practice might be excluded if it let costs get too high, but if other dermatology groups hadn’t signed up, the plan might still retain the group because it needed to fill out its network.
In exclusive provider networks such as BlueCare, however, the provider network has to be committed to savings. Blue Cross pays Advocate a fixed fee to cover patients in the plan, and Advocate gets to keep any savings. This is also the basic approach of ACOs, which are contracting narrow networks with payers, too. (It comes as no surprise that the Advocate arrangement was based on an ACO.)
Similar cobranded arrangements are being offered by narrow networks on the exchanges. In 2016, the number of such arrangements on the exchanges increased by 13%, according to McKinsey & Co.[4]
Such arrangements can also include several different health systems, as is the case for Vivity, a narrow network in California launched by Anthem Blue Cross in 2015. Vivity has seven different health systems that share profits and losses, as well as clinical and claims data. Patients can even be referred to specialists in another member health system.[32]
Networks Choose Doctors Based on Clinical Performance
Some narrow networks are not just slashing expenses but are also selecting doctors based on clinical performance, according to a consultant for health plans who asked not to be identified because he was talking about his clients’ strategies.
But he says plans offer a variety of conflicting clinical performance standards, and that can be confusing for physicians. “Every health plan is doing physician selection differently,” the consultant says. “If you alter your practice for one plan, you can’t assume that it will help you with another plan.”
For example, one plan may be monitoring whether primary care physicians’ patients are coming back for an appointment every 6 months, he says, whereas another plan might be interested in a particular outcome for patients. And a third plan might focus on getting patients enrolled in healthy living interventions, such as weight-loss programs, he adds.
“Everyone is still pretty new at this,” the consultant says. “There’s a lot of trial and error going on.”
Some narrow plans have abandoned the drive for cheaper premiums and are actually raising their premiums in a quest for higher quality.
Oscar Health, a New York-based health insurance company founded in 2012, raised its rates when it went narrow in 2016, in an effort to improve quality. The company reported that about two thirds of members stayed with the insurer despite the higher rates.[33]
Oscar has joined the trend toward partnerships with providers, forging exclusive contracts in certain markets, such as the Cleveland Clinic in Ohio, Tenet in Dallas, and Mount Sinai and Montefiore in New York City.
In another permutation of narrow partnerships, some large employers have been partnering with prestige outlets, such as Mayo Clinic, Geisinger Health System, and Cleveland Clinic, to handle expensive procedures like hip replacements, cancer care, and heart surgery. Employees needing care are flown to these providers, with all expenses paid by the company.
Walmart, the largest private employer in the country, with about 1.5 million workers, has been forging such relationships for several years through its Centers of Excellence (COE) program.
Recently, Walmart executives were shocked to learn that many of its employees were being referred to its COE providers unnecessarily. For example, physicians at the COEs determined that 30% of patients sent to them for spinal procedures did not need them.[34]
At a conference this May, Walmart executives said they were planning to use the data on unnecessary referrals to form “optimized networks,” which would presumably weed out physicians who referred too many patients for unnecessary care.
“We are going to build optimized networks and drive utilization to the highest value providers,” a Walmart executive said, according to a report on the meeting.[35] A Walmart spokesperson contacted by Medscape since then said the company had as yet nothing more to say about this proposal.
The Situation Today
Narrow networks have become a fixture in the low-cost insurance market. They have disrupted physicians’ practices and provided scanty coverage in some cases, but regulations and lawsuits have generally failed to limit their cost-slashing strategies so far.
Now narrow networks are poised to enter higher-cost markets that really matter to physicians. Because employers want long-term results, narrow plans may behave better there. There are already signs that some plans are more concerned about clinical performance and not just cutting costs.
If narrow networks actually do enter the employer market in large numbers, will they be successful there? Physicians such as Chen, the Arizona ophthalmologist, have their doubts. Patients who have had the same doctors for many years, he says, will want to keep them.
In the other hand, many employees may be seduced by the potential savings of narrow networks. In a 2016 survey, buyers of individual insurance were almost evenly split between those who might join a narrow network and those who would rather keep their physician. Whereas 21% said the most important factor in plan selection was keeping their preferred doctors, 24% said it was having the lowest premium.[36]
Meanwhile, some narrow networks are moving away from the expense-slashing strategies of the low-cost plans and adopting a value-based approach. Plans are partnering with health systems to share savings using value-based approaches.
These new partnerships erase the need for plans to weed out individual physicians, which has caused a lot of angst in the medical community, particularly among specialists. In these new arrangements, anyone who is part of the system is automatically part of the network. In this scenario, network adequacy is no longer a problem, as long as the system is big enough.
Are narrow networks entering an era of peaceful coexistence with physicians? Some say that’s unlikely; at this point, it’s too early to tell.
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