Narrow networks reduce specialized care for the sickest patients

Controlling Health Care Costs Through Limited Network Insurance Plans: Evidence from Massachusetts State Employees

By Jonathan Gruber, Robin McKnight
The National Bureau of Economic Research, NBER Working Paper No. 20462, September 2014


Recent years have seen enormous growth in limited network plans that restrict patient choice of provider, particularly through state exchanges under the ACA. Opposition to such plans is based on concerns that restrictions on provider choice will harm patient care. We explore this issue in the context of the Massachusetts GIC, the insurance plan for state employees, which recently introduced a major financial incentive to choose limited network plans for one group of enrollees and not another. We use a quasi-experimental analysis based on the universe of claims data over a three-year period for GIC enrollees. We find that enrollees are very price sensitive in their decision to enroll in limited network plans, with the state’s three month “premium holiday” for limited network plans leading 10% of eligible employees to switch to such plans. We find that those who switched spent considerably less on medical care; spending fell by almost 40% for the marginal complier. This reflects both reductions in quantity of services used and prices paid per service. But spending on primary care actually rose for switchers; the reduction in spending came entirely from spending on specialists and on hospital care, including emergency rooms. We find that distance traveled falls for primary care and rises for tertiary care, although there is no evidence of a decrease in the quality of hospitals used by patients. 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. We find such savings only for those whose primary care physicians are included in limited network plans, however, suggesting that networks that are particularly restrictive on primary care access may fare less well than those that impose only stronger downstream restrictions.

Full paper available at this link:


Narrow Health Networks: Maybe They’re Not So Bad

By Margot Sanger-Katz
The New York Times, September 9, 2014

Lots of people shopping in the new health care marketplaces this year picked health plans that limited their choice of doctors and hospitals. The plans were popular because they tended to cost less than more conventional plans that covered nearly every health care provider in a region.

The proliferation of these more limited plans, called narrow networks, has worried consumer advocates and insurance regulators. The concern is that people will struggle to find the care they need if their choices are limited.

Maybe we don’t have to worry so much. A new study suggests that, done right, a narrow network can succeed in saving money and helping certain patients get appropriate health care. The study, published as a working paper with the National Bureau of Economic Research, looked at a program that used financial incentives to steer workers into narrow plans. Those that chose the plans saved their employer money, saw their primary care doctors more and used the emergency room less.

Mr. Gruber says this study should not be the final word on narrow networks, but he said he hoped it would change the tenor of the debate about them. Instead of automatically seeing a narrow network as a sinister plan feature, he said, he hopes market watchers will now see them as a tool that can, in some cases, help save money without hurting patients.

“Nobody is talking about forcing people into these plans,” he said. “We’re talking about offering people a choice with price incentives.”


NYT Reader Comments:

Don McCanne 
San Juan Capistrano, CA

Quoting from the Gruber and McKnight paper:

"We first find that patients are very price sensitive in their decisions to switch to limited network plans…"

"…those who are most healthy are the most price sensitive."

"for the chronically ill… we find a strong shift in spending from specialists to primary care physicians…"

"…we conclude that the real savings from limited network plans arises from restrictions downstream from the primary care provider."

Healthy individuals buy the cheapest plans not worrying about the choices in specialized care that they believe they will not need anyway. But for chronically ill patients who are responsible for most of our health care spending, they are losing specialized services when they are enrolled in these narrow network plans.

This study was too short to be able to measure adverse outcomes due to lack of specialized services. Shouldn't we find that out before most of us are shoved into narrow networks?

Or better, shouldn't we take a closer look at proven systems that use public policies to control spending without restricting patient choice - models such as single payer or a national health service?


Portland OR

One thing that really concerns me about this is people with rare or complex conditions that need specialty care. Waits, for example, for endocrinology in my city are a minimum of 3 months for new patients and diabetes is one of the nations' biggest health problems. It is also very difficult now for new patients to find a new primary care MD depending their insurance. Narrow networks prevent people from accessing care. I am a nurse case manager, so arranging transitional care is what I do for a living. I'm surprised to see this article. It's a little myopic.


San Francisco

Let's be honest. Narrow networks are fine for people who are not sick now and are willing to take the chance that they will not get sick in the coming year. If you are already ill or worry that you may become ill, narrow networks are not good. Don't lie to us...


Further comment:

By Don McCanne

The most important finding in this study is that enrollment of chronically ill patients in narrow networks results in a strong shift in care from specialists to primary care physicians. That reduces costs, but does it change outcomes? According to the authors, “we are unable to demonstrate health effects with any certainty.”

The work of Barbara Starfield and others has previously demonstrated that a strong primary care infrastructure does provide greater value in health care. But people with serious chronic disorders - where a disproportionate share of our health care spending is directed - may very well benefit from specialized care.

This study shows that narrow networks are used to block access to that specialized care, simply by excluding coverage of much of the specialized services offered within the community. As this study shows, the care defaults to the generalist regardless of the patient’s specific needs.

A well functioning system would provide liberal access to primary care services, which would then provide a portal to an appropriate level of specialized services. A singe payer national health program would do precisely that - primary care not serving as a gatekeeper but rather serving as a resource to improve integration of health care services.

Narrow networks are a tool of private insurers used to reduce spending by impairing access to care no matter how appropriate it might be. Jonathan Gruber indirectly acknowledges the concerns people have about narrow networks when he states, “Nobody is talking about forcing people into these plans.” But patients are backing into these plans simply because they cannot afford other plans with more comprehensive networks.

Under single payer, the network is the entire health care delivery system. That’s the network that we need - for all of us.