McKinsey's definition of a broad network is any plan that covers at least 70% of hospitals in an area. Narrow-network plans are those with 30% to 70% of hospitals covered. And ultra-narrow networks are defined as those with fewer than 30% of facilities included in the plan. McKinsey also classified tiered products—which require different copayments depending on which facility a patient seeks treatment at—as narrower-network plans.
Insurers that competed in the individual market before the exchanges were created are also offering a higher proportion of narrow-network products. Among the 138 insurers for which data was available, 59% of products offered on the exchanges in 2014 were broad-network plans. That was down from 80% in the individual market in 2013.
New entrants into the individual insurance marketplace are also offering a large share of narrow-network products. Among carriers that previously covered only Medicaid beneficiaries, just 10% of their plans had broad provider networks. For health plans run by providers, that figure was 17%. And for not-for-profit co-op plans that were seeded with federal loans under the Patient Protection and Affordable Care Act, their products were evenly split between broad- and narrow-network options.
In most instances, narrower-network plans offered cheaper coverage options to consumers. The McKinsey study found that premiums were 13% to 17% higher for broad-network plans depending on the level of coverage a customer selected. In addition, nearly 70% of the cheapest plans available were narrower-network options.
Previous efforts to narrow networks by health plans in the mid-'90s sparked a backlash from customers and a spate of state laws requiring that insurers include any willing provider in their networks. But Coe points out that the dynamic was different then because it was employers imposing narrow-network plans on their workers.
“It's now the consumer who's actively making a choice themselves,” Coe said.
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