Narrow Network Health Plan Products - Does the Adage “Less is More” Apply to Provider Networks?

Vol. 10 No. 4

AuthorDue to the increasing pressure to contain the rise of healthcare costs, it stands to reason that a narrow network of lower cost, high value providers should help bend the cost curve.  But there are a host of factors that health plans must also consider. Does the adage “less is more” apply in this context?  If managed well, these narrow networks can provide value to employer groups and individual enrollees.  When designing these products, health plans, and employer groups who seek to offer them, must take into account the market readiness for these limited network products, as well as the interests of their members, the providers, and the regulatory environment.  In order to implement these plan designs effectively, members need to understand the design and become more engaged in their healthcare decision making so that they make informed decisions about where to get care.  Plans needs to ensure there is adequate network access so that care can still be delivered and coordinated effectively and that everyone involved in the offering has a clear understanding of the plan design.  Additionally, providers need to have a means of determining what subset of providers participates in the narrow network as they refer members to specialists.

This article examines why narrow networks are growing in popularity and some of the challenges from a member, contracting, and regulatory perspective.  While the article focuses primarily on Massachusetts, which introduced comprehensive health reform in 2006, much of what is covered has application in other states given that the federal Patient Protection and Affordable Care Act resembles the Massachusetts model in many ways.1  Certainly, as these networks grow in popularity around the country, it is safe to assume that regulators will look more closely at network access issues and other aspects of this emerging plan design.

The Landscape

Employer groups are increasingly looking to narrow network products not because they’re limited by definition but because of the lower price point that attaches.  In some instances a small to mid-size employer group is seeking the lower cost option, and requests that a limited network be designed for its employees; in others, the health plan is working to offer other options at the lower end of the cost spectrum either on or off the health insurance exchange created by the Act as part of its suite of products.  It is reasonable to expect interest in narrow networks to increase as plans seek to offer lower cost options on the exchange to attract individuals who seek affordable coverage.  

It’s not only the private sector that is looking at the narrow network option as an effective cost cutting tool.   In fact, in Massachusetts the Attorney General has cited the usefulness of these narrow networks, or limited networks as they are sometimes referred to, in containing costs in a number of reports on healthcare costs in recent years.2 The Attorney General participates every year in healthcare cost hearings that the Center for Health Information and Analysis, formerly the Division of Health Care Finance and Policy, holds pursuant to Mass. Gen. Laws c. 118G, §6 ½(b) and Mass. Gen. Laws c. 6D, §8.

In the report from 2011, the Attorney General for Massachusetts noted as one of the six key findings: “[t]iered and limited network products have increased consumer engagement in value-based purchasing decisions.”3  The Attorney General therefore recommended promoting these types of plans as a means of encouraging value-based purchasing.4 The Attorney General also acknowledged that limited networks alone will not solve the cost conundrum; the report points out that in order to deal with the overall cost problem there are a number of other factors that must also be addressed.5  That said, Massachusetts state law now requires plans with at least 5,000 enrollees to offer either a limited or tiered network offering in the small group insurance market, and this limited or tiered network must represents a 14 percent reduction in cost from a similar full network offering.6 The legislation also contains requirements relating to provider opt out rights, provider appeals, marketing materials to enrollees, and utilization reporting.  In 2013, the Attorney General noted that consumers were increasingly selecting narrow network products.7 Again in 2013, the Attorney General stated in the annual report her office issues on healthcare costs: “[t]iered and limited network products are a leading example of using product design to encourage consumers to obtain care from more efficient providers, which results in immediate cost savings.”8

Additionally, the Group Insurance Commission (“GIC”) which serves as administrator of health benefits for state workers and some municipal workers within the Commonwealth of Massachusetts, has required for years that the participating health plans offer tiered networks that measure providers on quality and cost.  In 2010, the GIC imposed a requirement that participating plans introduce a limited network option.  The limited network was composed of lower cost providers and therefore yielded lower overall costs to the self-funded healthcare program. In the first year, GIC employees were encouraged to enroll by receiving a financial incentive9 of three months of premium paid on their behalf upon enrollment. The GIC reported that: “over thirty-one percent of [GIC] employees elected to save money and chose a less expensive, limited network plan, which will save the Commonwealth millions of dollars for the year.”10

Despite the favorable press narrow networks sometimes garner, this plan design poses challenges, as well.  Unless a health plan accompanies a narrow network with educational materials and full disclosures about the plan’s design and inherent limitations, the limited network with a corresponding lower price point can sometimes create an uneasy tension.  Employees may not be aware that the new health plan product differs significantly from the prior year’s product until they are hit with a substantial bill for out of network services.  This creates customer dissatisfaction that can easily grow disproportionately through social media channels if health plans and the employer groups who elect these narrow networks do not educate the individuals on how the plan design works.11  Additionally, individuals have to become more actively engaged in healthcare decision making so that they can better assess whether they truly need to go out of network for a relatively simple procedure that may be as effectively handled at a community hospital at a significantly lower cost.  As healthcare consumers are forced to make informed decisions about where and how to get healthcare or face the financial consequences, they will be engaging in value-based decision making which is often talked about in the context of health reform.

Regulatory Considerations

From a regulatory perspective, health plans must consider network access and network adequacy, which the state’s governing insurance department will review in states like Massachusetts.  Additionally, the content of marketing materials, the provider directory, and whether the provider has agreed to participate or exercised a mandated opt out right that applies to new insured limited or tiered offerings all come into play in Massachusetts.12 There is certain language alerting members to the fact that the network is limited that must appear on marketing materials and the provider directory.13 Health plans must also have a means of providing out of network care at the in-network level of benefits when there is no available in-network provider to deliver the care.  

Massachusetts has been active in the health reform arena for a number of years, and has been a highly regulated market since 2006.  As a result, it is unlikely that other states will impose as strict of a regulatory framework on these plan designs.  That said, while narrow networks are not yet found in every part of the country, it’s reasonable to expect that this type of plan offering will be more common in the years to come as part of the state or federal health insurance exchange framework in which health plans will participate.

Certainly questions of network adequacy will be more of an issue with these limited network plans.  Most state insurance departments have mandated standards they apply, but the federal government has not yet issued adequacy standards for products on the federal exchanges.  For now, in most states, the state insurance department will take the lead in evaluating network adequacy and access for the narrow networks plan designs.  Massachusetts’ requirements on limited and tiered networks stipulate that access be available so that covered benefits are available in a way that doesn’t negatively impact the enrollee’s health.  Namely, the Division of Insurance must look at the totality of the narrow network and take into account factors such as the location of the providers, employers and members who may enroll, the range of services provided and related factors.14  The Massachusetts regulations define Network Adequacy as follows: “[s]ufficient access to Covered Benefits with a Provider Network within the Health Benefit Plan's Service Area to guarantee that all Covered Benefits are accessible to Insureds without delays detrimental to the Insureds’ health.”15 

Narrow networks are in the forefront of the healthcare model in a number of other states, as well.   For instance, the tension between market forces and this limited network design are coming to a head in the state of Washington.  Earlier this year, Seattle Children’s Hospital filed suit against the state’s insurance commission challenging network adequacy as a result of  its exclusion from a number of plans to be sold on Washington’s state insurance exchange.  In Kings County, where the Hospital is located, only two of the seven plans included Children’s Hospital.  Children’s also filed an administrative appeal in October 2013 and is requesting that the Office of the Insurance Commission exclude health plans that don’t include Children’s Hospital as an in-network provider from the state exchange.  The matter is now before an administrative law judge.16  It is too early to tell if this is a harbinger of more litigation to come or an isolated example of a hospital choosing to fight back when it is excluded from a narrow or limited network.

This type of provider concern, however, is not unique to Washington State.  In New Hampshire, certain hospitals have also complained informally of their exclusion from limited networks available on the exchange that Anthem Blue Cross & Blue Shield in New Hampshire will offer.17 The health plan has cited the need to keep down costs and stated that the network design will give the plan leverage when negotiating rates which will also help attract the uninsured; however one of the hospitals noted that it had the lowest rates in its region and had not been invited to participate.18


When evaluating a narrow network plan, it comes down, essentially, to a matter of choice between a full network plan with a wide range of providers versus a lower price point for a narrow network plan that offers fewer providers.  An insured narrow network plan generally has to meet state regulatory standards, and since it is subject to regulatory review, it should provide a sufficient network that can effectively coordinate the care for the plan’s members.  Educating the employer groups and individuals who are enrolled in a narrow network at the outset is key.  If members don’t understand the limitations as to which providers are in-network and/or if they don’t make informed decisions before getting care, it’s possible that their care will not be covered under the plan design.   In such a case, the member may be left with a large and unexpected bill for medical services.   However, when the member understands that he or she must make sure that he or she is accessing care from an in-network provider and makes thoughtful decisions about the care in a non-emergency setting, the plan can be a lower cost alternative that still provides effective, coordinated care.  Additionally, the participating providers must have a good understanding of which other providers participate so that the referrals they make do not unwittingly send the member to a provider who is not part of the narrow network.  Plans need to ensure their marketing materials, provider network, and customer service resources all help support the success of a narrow network design. Plans also need to help guide employers and individuals, as a narrow network plan will not be right for everyone depending on where individuals live or work and what their particular medical needs are.  Less can be more if the health plan introduces a narrow network in the right economic climate and in a deliberate, well-planned manner. 

1“What is the Evidence on Health Reform in Massachusetts and How Might the Lessons from Massachusetts Apply to National Health Reform?” Urban Institute, by Sharon K. Long, June 21, 2010, available at
2Office of Attorney General Martha Coakley, Examination of Health Care Cost Trends and Cost Drivers, Report for Annual Public Hearing, June  22, 2011, p. 4, available at; Office of the Attorney General Martha Coakley, Examination of Health Care Cost Trends and Cost Drivers Report for Annual Public Hearing, April 24, 2013, p. 10, available at
3Office of Attorney General Martha Coakley, Examination of Health Care Cost Trends and Cost Drivers, Report for Annual Public Hearing, June  22, 2011, p. 4, available at
4Id. at p. 6.
5Office of Attorney General Martha Coakley, Examination of Health Care Cost Trends and Cost Drivers, Report for Annual Public Hearing, June  22, 2011, p. 5, available at
6Chapter 288 of The Acts of 2010 originally required a 12% savings decrement, but that was amended in 2012 to be a 14% savings decrement.  Chapter 288, of the Acts of 2010, §§32 and 33, codified as Mass Gen. Laws c. 176J, §11; Chapter 224, of the Acts of 2012, §177, codified as Mass. Gen. Laws section 176J, §11. 
7Office of the Attorney General Martha Coakley, Examination of Health Care Cost Trends and Cost Drivers Report for Annual Public Hearing, April 24, 2013, pp. 1 & 10, available at

Id. at p. 4.

9Massachusetts Executive Office for Administration and Finance, Press Release, with information provided by the GIC, “State Employee Re-enrollment and Limited Network Plans Success,” available at
10Id., ¶1.
11Revive Health, Exchange Noise Becomes Signals We Can Interpret, Brandon Edwards, CEO Revive Health, August 23, 2013, available at , The Second Managed Care Revolution, posted by Don McCanne, MD, HMO Like Plans May be Poised to Make a Comeback Online Insurance Markets, by Julie Appleby, Kaiser Health News, January 22, 2013, ¶¶2-3, available at
12Mass. Gen. Laws c. 176O, §9A(a)(iv); 211 CMR 152.00 et seq.
13Massachusetts regulations provide that plans must include the following in marketing materials for limited or narrow networks: “The first or cover page of the Advertisements or Marketing Material, or electronic drop down menu of a web-based page, shall prominently disclose in a clear and conspicuous manner how to access a list of the Provider Network Providers and how to request a paper copy of the Health Benefit Plan’s provider directory and shall provide a Provider Network description statement substantially similar to the following: a. Limited/Regional Provider Network. This plan provides access to a network that is smaller than [Name of Carrier]’s [general provider network name] provider network. In this plan members have access to network benefits only from the providers in [name of network]. Please consult the [Limited/Regional] provider directory or visit the provider search tool at [web address] to determine which providers are included in the [name of network].” 211 CMR 152.06(1)(d)(1.).
14Mass. Gen. Laws c. 176J, §11(d) and (e).

211 CMR 152.02.

16Seattle Times, Healthcare Checkup, “Update, Molina now includes Seattle Children’s in Exchange Plans’ Networks,” October 22, 2013, available at
17New Hampshire Business Review, “Limited health networks raise the ire of snubbed hospitals,” by Bob Sanders, available at

Id. at ¶28.


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