Broad Healthcare Networks Do Not Equal High Quality

The Affordable Care Act has undoubtedly led to a litany of unintended consequences. The Congressional Budget Office expects that the law will reduce employment by the equivalent of 2.5 million people by 2024. Various businesses have either reduced hours for full-timers to avoid the employer mandate or stopped offering insurance to part-timers. One particularly public effect has been the rise of so-called "narrow provider networks" on health insurance exchanges, which limit access to hospitals, often excluding major medical centers.

But despite outrage from hospitals and patient groups, a recent analysis in Health Affairs suggests that these narrow networks are unlikely to hurt quality, and perhaps won't hurt access, either.

In order to keep premiums down in a competitive environment, insurers use these networks to exclude higher-cost (and lower-value) hospitals from their networks. This is especially important when, as with the ACA's exchanges, people are predominantly choosing health plans with high deductibles, exposing themselves to more first-dollar healthcare costs.

The growth of narrow networks on the ACA's exchanges has led to charges of inadequate access to care for patients, and some have even accused insurers of discriminating against sicker patients with chronic illnesses.

Some of these questions are subjective — it isn't immediately obvious what level of access to care is "adequate," for instance. But because insurance plans are sold both on-and-off the exchanges, we can at least examine whether the narrower networks are of similar quality.

In the Health Affairs study, a group of researchers from the University of Wisconsin-Madison and University of California-Irvine have begun to answer this question. The authors looked at California's exchange, identifying the biggest insurers by market share and comparing similar plans offered both on and off the exchange. And as could be expected, the plans available on the exchange typically were reduced versions of the "pure commercial" networks available off-exchange.

But quality isn't defined by the number of hospitals available to a patient. Low-value, high-cost hospitals arguably don't deliver much in the way of quality, so excluding them from networks shouldn't affect patient outcomes. And it turns out that on two quality measures — including mortality rates for six medical procedures and safety scores from Leapfrog's Survey Data — the on-exchange networks are no different than commercial networks, while on another they actually fare better.

Of course, this isn't the final word on narrow networks. For one, as the authors acknowledge, this analysis looks only at California. Other states may fare worse. Moreover, it's likely that networks are narrower than they need to be. Under the ACA, narrowing networks is one of the few tools that insurers have left to reduce premiums; indeed, a McKinsey analysis found that plans with broad networks typically have premiums 13-17 percent greater than narrow network plans. This means that making tradeoffs between deductibles, premiums and network size becomes much more difficult.

This is all to say that narrow networks involve a tradeoff — lower premiums mean restricted choice. But critics of this cost-control approach should be careful not to throw the baby out with the bathwater. Broad networks do not equal high quality care, and in fact, as insurers get smarter about building their networks, we may discover that narrow networks offer more value at lower cost. Simply put, this is a proposition that anyone should be willing to support.

This piece originally appeared in Washington Examiner

This piece originally appeared in Washington Examiner