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Provider networks are the doctors and hospitals that an insurance company contracts with to provide healthcare to enrollees at negotiated rates, typically resulting in lower enrollee costs compared with using out-of-network providers. In recent years, health plans are increasingly turning to provider network variations to keep costs low and sometimes to steer patients to high quality providers.
Unwarranted variation in price and quality across providers is well documented.1 This suggests that if patients can be directed to the higher-value providers, the system as a whole can achieve cost savings and better quality. At their best, provider networks would signal to consumers which providers meet high standards for quality and value. Unfortunately, it is more often the case that the typical healthcare consumer cannot readily identify the high-value physicians and hospitals.
A recent study examining physician networks on the ACA marketplaces in 2017 found that rate of narrow network plans have declined from 31 percent in 2014 to 21 percent in 2017.2 The authors pointed out that on the marketplaces, consumers have had little indication of network size when choosing a plan. To address the issue of transparency, for 2017 the Centers for Medicare and Medicaid Services piloted a display of network breadth information on the marketplaces in four states: Maine, Ohio, Tennessee, and Texas.
1. See for example: Wennberg, John E., and Peggy Y. Thomson, “Time to tackle unwarranted variations in practice,” BMJ (March 2011); Office of Massachusetts Attorney General Martha Coakley, Examination of Healthcare Cost Trends and Cost Drivers, Report for Annual Public Hearing.
2. Polsky, Daniel, Janet Weiner and Yuechan Zhang, Narrow Networks on the Individual Marketplace in 2017, Leonard Davis Institute of Health Economics, Univ. of Pennsylvania (Sept. 14, 2017).