What is a “narrow network” in health insurance?
Narrow networks are insurance company agreements with medical service providers that seek to lower costs by using fewer providers than traditional networks. Narrow networks are simple and straightforward lists of participating doctors and hospitals for subscribers to a health insurance plan.
Customers can quickly see the options for medical services covered by insurance benefits. Comparison shopping is an excellent tool for selecting insurance plans using narrow networks.
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What are networks in health insurance?
Health insurance networks are agreements signed by doctors and hospitals to provide medical services to health plan subscribers.
With network agreements, insurance companies negotiate below-market prices for the services; in turn, the medical services companies get a guarantee of high customer volumes, and the consumer gets a reliable source of medical care at network prices.
Networks can be broad with a plan to provide easy access, short wait times, and convenient locations for consumers. Networks can be narrow and offer fewer choices than a broad network.
What are narrow networks?
Just as networks get below-market prices, narrow networks get lower prices and high-value medical care. Medical care service providers get high patient volumes. The narrow network offers price incentives to get consumers to the cheapest medical service with the highest value for patients.
The goal of healthcare is not just to count the numbers of patients served; rather, the object is to count the best patient outcomes. The theory of the narrow network is similar to the Obamacare emphasis on the quality of patient outcomes.
The Individual Mandate and Guaranteed Acceptance
The core of the Affordable Care Act requires every eligible person to get insurance and for insurers to accept every eligible person. The network is common to every type of managed care.
Insurance companies engage medical care providers to serve plan subscribers. They use service agreements that set below- market prices.
The plan gets the benefit of low prices, the medical services providers get increased customers, and the consumer gets the agreed benefits and coverage.
Qualified Health Plans
The Affordable Care Act requires minimum value and particular content for all health plans. The plans that meet these requirements are qualified health plans, and they satisfy the individual mandate. Qualified health insurance must have minimum levels of benefits and protections.
Benefits in Qualified Health Plans
Qualified plans must offer the 10 essential health benefits such as screenings, ambulance services, and annual examinations. They must have Minimum Actuarial Value.
Qualified plans must cover a minimum of 60 percent of the costs of covered benefits. This level of benefits is the coverage of a bronze Obamacare plan.
Limits on Deductibles and Expenses
The Affordable Care Act limits annual costs for consumers for deductibles and out-of-pocket expenses. Once past these limits, consumers get full insurance costs coverage for benefits. Minimum Essential Coverage is a measure of sufficiency.
Qualified health insurance must have minimum essential coverage for serious illnesses and the medical care likely to follow. This requirement is comparable to major medical coverage provided by governments and large corporate employers.
Impact of Narrow Networks
Narrow networks challenge the accepted ideas of adequacy. The states and the federal CMS reviewed insurance networks for adequacy. They investigated whether the network was strong enough to handle the benefits of the plan and the needs of the enrolled population in the service area.
When faced with incomplete networks in Medicare Advantage, the CMS requires an undertaking to fill out the network. Providers must agree to pay at least the level of Original Medicare. The below-listed items describe some typical results of an inadequate network.
- Fewer choices for subscribers
- Longer wait times for some services or benefits
- Higher prices for specialists services
- Higher costs for outside services with low or no cost sharing
Using Services Outside the Network
Narrow networks can increase consumer demand for using outside services. Narrow networks may reduce the options available for a particular service or medical treatment.
In HMO, EPO, and POS type of plans, providers typically pay nothing towards the costs of services outside of the narrow network.
Outside services do not count towards plan limits for expenses or the deductible threshold and annual limit. Comparison shopping is an excellent method for comparing health plans. One can focus on particular features such as cost sharing for outside network services.
Outside Network and Policy Limits
Reaching plan limits for deductibles or expenses are the best results for many subscribers. Once past these limits, the plan must pay the entire costs of covered benefits. These spending levels may be elusive in high deductible plans but reachable in other Obamacare plans.
Narrow networks can make reachable limits unreachable to the extent that subscribers use outside resources. The dollars that count towards the limits are the dollars spent on network resources.
Strengths of Narrow Networks
The narrow network offers a potential for low-cost services and better use of high-value providers. For example, evidence may determine that small doctor offices are better at combining prevention, wellness, and checkups for women than larger hospital settings.
Conversely, one might find that large hospital nurses and physician assistant specialists provide better care for woman wellness visits than small offices. The strength of the narrow network is to drive consumers towards the best value in medical care for their needs.
Weaknesses of Narrow Networks
The narrower the network, the fewer options that consumers have when looking for a particular service or benefit. For example, the narrow network may serve the consumer’s needs until he or she requires a cancer specialist in a rare instance of the disease.
The consumer may have to go outside of the network and pay all of the expenses out of pocket. Using outside services can cause tremendous medical debt. Narrow networks may cause backlogs and waiting periods for certain services or benefits due to a small number of medical care providers.
Innovation and Study
The federal government uses fact-based evidence on the effectiveness of narrow networks.
The key to the approach is to study ways in which consumers use and interpret providers’ information on narrow networks.
There is a potential for disappointing consumers when they discover too late that their plan does not cover a needed service.
The Narrow Network in Health Insurance
The narrow network is a growing trend in provider services. Health insurance providers use narrow networks to reduce their costs, protect profits, and offer attractive prices to consumers.
Insurers use narrow networks to respond to consumer demands for lower premiums and costs. The CMS has increased attention paid to the adequacy of Medicare and other networks. Comparison shopping can help consumers select health plan with networks that meet their expected needs.
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