Health plans that offer lower prices to members who use a so-called “narrow network” of hospitals and doctors are becoming more common. And while the discounts are welcome, narrow networks are also getting pushback from consumers if their favorite health care providers don't happen to be in that network.
Joseph Berardo Jr., chief executive of the health plan management firm MagnaCare, argued that a well-designed narrow network is one that delivers financial savings and also enables members to go outside the network if necessary.
Berardo pointed out that narrow networks contribute to the affordability of several of the new health insurance plans offered in New Jersey on the HealthCare.gov exchange under the Affordable Care Act. And narrow networks are increasingly common off the exchange: In some cases, health plan members have lower out-of-pocket expenses or aren’t subject to deductibles if they stick with the doctors and hospitals in the narrow network.
“This is really the only way to get to the price point that I think everyone believes will be attractive to the consumer,” Berardo said.
MagnaCare provides health plan management, including claims and customer service. Clients include CarePoint, a health care system of three hospitals and a network of physicians in Hudson County that offers a Medicare Advantage product focused on the CarePoint network. The CentraState Healthcare System in Freehold offers employers a health plan focused on its hospitals and doctors, and Barnabas Health has announced it will begin offering a health plan next year.
The payer, who may be a health insurer or a self-insured plan administrator, negotiates a lower reimbursement rate with providers in the narrow network and passes the saving along through lower premiums.
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Berardo said the cost savings that result from a narrow network are compelling: “You’re looking at a price point that could be 15 and 20 percent below the broader network.”
Health insurance broker David Oscar with Altigro agreed: “The huge advantage of a narrow network is that the premium is reduced drastically.”
Berardo said the move to narrow networks goes hand in hand with the rise of consumer choice in health care.
For example, individuals select their own health plans at HealthCare.gov. And employers are increasingly offering “private exchanges” where workers get a set sum of money from the employer to shop for their own health plan. Experts say when consumers buy their own health care, they often choose less expensive plans that in many cases achieve savings through higher deductibles or narrow networks.
Berardo said that traditionally New Jersey health plans would offer members a huge network of providers, but generally members would use nearby hospitals and doctors. He said as narrow networks increase, “People are going to choose systems of care around the communities where they work or live.”
Oscar said the downside is that narrow networks exclude certain providers. “For the communities that are willing to change doctors, the narrow networks are wonderful,” he said.
For most people, the local hospital and the neighborhood doctor will meet their medical needs. But Berardo said the well-designed narrow network “has to provide a secondary network for things that their system of care doesn’t provide, and that could be cancer care or cardiac care. Although people will be choosing programs that keep them in a more tightly managed, integrated system of care, there is going to be a recognition that you have to let people pull a safety valve in certain conditions and go to other centers of excellence.”
Oscar said the key to making narrow networks work is to educate the members of the health plan on how to use them. For example, in some narrow networks, the member can’t use out-of-network providers at all; in other cases, the member can go outside the network but will have higher out-of-pocket expenses.
“If the members are not educated as to how their narrow network works, and how to find the correct doctors and hospitals within those networks, they are going to be out of luck,” Oscar said. “As long as the plans can teach people how to use narrow networks, they will be fine.”
Berardo said narrow networks are part of the widespread reorganization of health care, in which hospital systems are acquiring or affiliating with primary care physicians in order to achieve “clinical integration” or systems of care that endeavor to both improve patient health and avoid unnecessary spending.
“The most meaningful thing in health reform that I’ve seen is the reorganization of the medical delivery system to be completely focused on clinical integration, and it will take us 10 years to probably get there.” Berardo envisions a health care landscape of clinically integrated health systems, in some cases with a hospital at the center, and health care management companies like MagnaCare “will kind of quilt those systems together and offer products to employers.”
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