Most ACA exchange plans feature a narrow network

Health insurers are sticking with their strategy of offering mostly narrow-network plans on the public health insurance exchanges in 2019, according to a report from consulting firm Avalere.

Among the plans being offered in states that use HealthCare.gov, 72% are narrow, meaning they have fewer providers in the network and require members to seek care from those providers to obtain coverage. That's slightly less than the 73% of 2018 plans considered narrow network, according to Avalere.

The trend toward narrow-network plans and away from health plans with a broader selection of doctors and hospitals has persisted since the inception of the Affordable Care Act exchanges in 2014, and while it seems to have leveled out in 2019, it's unlikely that narrow networks will become less popular any time soon. Narrow network plans like health maintenance organizations and exclusive-provider organizations often provide no coverage for patient visits to out-of-network providers.

"This is a trend we're seeing not just in this market but in traditional employer-sponsored insurance, and this is going to continue," said Chris Sloan, a director at Avalere.

Narrow provider networks have grown popular in recent years as health insurers seek to control their members' spending by steering them to certain lower-cost doctors and hospitals. Insurers struggled to manage the high-risk population who enrolled in exchange plans at the start of the ACA under new requirements that they offer a menu of 10 essential health benefits and limit out-of-pocket spending without charging different amounts based on a person's health condition.

Switching to narrow-network plans remains one of the few ways health insurers could manage costs and utilization while ensuring they get the best rates from providers, Sloan explained.

But while narrow-network plans do save money for insurers and allow them to offer lower premiums to plan members, it also means members have fewer choices. That's not necessarily a negative thing, so long as consumers understand what they're buying, Sloan said.

"Narrow network doesn't mean it's bad, or that patients in the network are getting subquality care," Sloan said. "You can have a narrow network that's great and that's high quality."

Narrow-network plans' low premiums are a draw for many price-sensitive ACA exchange customers. A September 2017 Health Affairs article by researchers at Harvard and Northwestern University found that exchange plans with narrow physician and hospital networks were 16% cheaper than those with broad networks in 2014.

Still, critics of narrow-network plans say some insurers contract with too few in-network providers, forcing patients, particularly in rural areas, to drive long distances. Provider directories are often inaccurate, they argue, and patients sometimes learn that a doctor or hospital was out-of-network only after they receive a big medical bill. Health insurance literacy is also low, and shoppers have a hard time understanding their benefits.

Of the narrow-network plan offerings in 2019, HMOs remain the most common type in HealthCare.gov states, making up 53% of all plans, down from 57% in 2018, according to Avalere. Exclusive provider organizations, or EPOs, which also feature narrow networks, grew to represent 19% of plans on the exchanges, up from 16% in 2018. Among the plans with broad networks, preferred provider organizations, or PPOs, stayed flat at 21% of exchange plans, as did point-of-service plans at 6%.

HMOs haven't always dominated. A McKinsey & Co. analysis of federal and state-based exchanges from November 2017 found that HMOs made up a third and PPOs made up half of all plans at the inception of the exchanges in 2014.

Meanwhile, employers are embracing narrow networks more slowly. Just 7% of small companies with less than 200 employees offered what they consider a narrow-network plan in 2018, while 5% of larger firms with more than 200 employees offered a narrow-network plans, according to the Kaiser Family Foundation.