Narrow provider networks and willingness to pay for continuity of care and network breadth

Abstract

Tiered and narrow provider networks are mechanisms implemented by health plans to reduce health care costs. The benefits of narrow networks for consumers usually come in the form of lower premiums in exchange for access to fewer providers. Narrow networks may disrupt continuity of care and access to usual sources of care. We examine choices of health plans in a private health insurance exchange where consumers choose among one broad network and four narrow network plans. Using a discrete choice model with repeated choices, we estimate the willingness to pay for a health plan that covers consumers’ usual sources of care. Willingness to pay for a network that covers consumers’ usual source of care is between $84 and $275/month (for primary care) and between $0 and $115/month (for specialists). We find that, given that a network covers their usual source of care, consumers show aversion only to the narrowest networks.

Introduction

Tiered and narrow provider networks are mechanisms implemented by health plans to reduce health care costs. Compared to plans with broad networks, health plans with narrow networks typically offer consumers restricted provider choice in exchange for reduced premiums. Health plans have implemented tiered networks through limiting choice of costly providers – typically as hospitals (Robinson, 2003) – or restricting access to low-performance physicians (Draper et al., 2007). Private health plans have moved towards narrow and tiered networks to compete in price in the commercial market and in the Affordable Care Act (ACA) marketplaces: plans with larger networks have premiums between 6 and 13% higher than those with smaller networks in ACA marketplaces (Polsky et al., 2016). Recent data show that approximately 41% of networks offered in the marketplaces plans can be considered ‘small’ or ‘extra small’ (Polsky and Weiner, 2015).

There are several concerns regarding narrow networks. Network adequacy is one of them: narrow networks could become “too narrow” and not offer coverage of certain provider types. An evaluation of the plans offered in the federal marketplace shows that 15% of narrow network plans lacked access to in-network physicians in at least one specialty (Dorner et al., 2015). The state and federal governments have set rules in order to guarantee that the plans in the marketplaces and the commercial market offer networks with sufficient breadth. However, insurers were given flexibility to meet these adequacy requirements (Corlette et al., 2014). Previous research has shown that consumers value network breadth, measured in terms of access to hospitals (Ericson and Starc, 2015; Shepard, 2016). Other measures of network breadth include the relative (Polsky and Weiner, 2015) or absolute number of providers covered in a certain area (Atwood and Lo Sasso, 2016; Gruber and McKnight, 2016).

Narrow networks also may disrupt continuity of care and existing patient/provider relationships by excluding the consumer’s current provider. Consumers exhibit provider loyalty and value continuity of care, as a continuous relationship with a provider leads to the development of trust and confidence (Pandhi and Saultz, 2006). Concerns regarding the disruption of continuity of care might be more relevant to consumers with poorer health status, as the selection of high-performance or less costly providers into narrow networks may exclude providers that treat high-risk patients (Brennan et al., 2008). Regardless of health status, consumers value plans that provide access to their current providers. Spurlock and Shannon, (2015) found that the ability to keep your current doctor was the second most important characteristic of a health plan, preceded only by low premiums.

There is recent interest in the effect of narrow network plans. Polsky et al. (2016) shows that premiums of broad network plans in the ACA marketplaces are between 6 and 13% higher than those in narrow network plans. Gruber and McKnight (2016) and Atwood and Lo Sasso (2016) find reductions in health expenditures associated with narrow network plans in the commercial health insurance market. With regard to consumer value of network size, Ericson and Starc (2015) show that individuals are willing to pay between $56 and $126 per month more for a plan with a broad network than for a plan with a narrow network. Network breadth in Ericson and Starc (2015) is measured by access to hospitals covered by the network.

We use enrollment information from a private health insurance exchange offered by a single health insurer and a discrete choice model with taste heterogeneity to elicit consumer preferences for health plan choice, in particular, to separately estimate preferences for network breadth and continuity of care. We are in the unique position of observing established patient/provider relationships and usual source of care at the time of network choice. With this information we can observe continuity of care, i.e., the ability of a network to cover consumers’ usual source of care, as a network characteristic. We add to the literature of the consumer valuation of narrow networks by analyzing the consumers’ choice of plans with broad and narrow networks of several sizes within a private health insurance exchange. Our results show that, when the choice model does not take into account continuity of care, consumers appear to value network breadth per se; but once continuity of care is a characteristic of the choice model, consumers are averse only to the narrowest networks. We estimate a willingness to pay for a network that covers the consumer’s usual source of care of between $84 and $275 (for primary care) and up to $115 (for specialty care) per month depending on the patients’ health status.