Reform Update: Narrow Networks Bring Equal Parts Controversy and Savings

Health plans with narrow provider networks—which met with fierce backlash from patients and providers during the last go-around in the 1990s—are once again vulnerable to negative public opinion and legislative action. But their failure now could undermine one of healthcare reform's key mechanisms for keeping premiums down, according to a special report from Moody's Investors Service.

The health insurance exchanges may suffer if plans and providers are required to broaden their networks in response to consumer backlash or new laws and regulations, Moody's Investors Service said in the report. “Narrow networks are one mechanism … that are being used by health care insurers to reduce healthcare costs,” said Moody's senior vice president Lisa Martin. Broader networks may include higher-cost hospitals such as academic medical centers which have added expenses for training future doctors. Premiums would rise to match the network's expenses, potentially driving away customers, Moody's said.

Marketplace success will depend on the degree that consumers trade off broad choice for cheaper prices and the strength of pushback from excluded providers.

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Source: Modern Healthcare