Today’s narrow networks: Repeat of history, or new and improved?

Health Maintenance Organizations (HMOs) and the narrow provider networks they used spurred plenty of controversy in the 1980s and 1990s. But in a time of continuously rising health care costs, narrow provider networks are making a comeback.

Will they last?

Recent numbers suggest they might, due to their popularity with both employers and those who buy insurance through exchanges.

Nearly a fifth of large employers (17 percent) offer a narrow network plan to their employees, according to the National Business Group on Health. That number will likely grow, as nearly half of large employers are considering a narrow network within the next three years.

One noteworthy example of large employers shifting to narrow networks include Boeing, which recently signed an agreement that will offer its 27,000 employees a choice of two ACOs. Intel has a similar arrangement for its 5,700 employees in New Mexico.

Employers are attracted to narrow network plans because of their affordability. But quality of care is also a consideration. Significantly improved analytics make it possible for narrow networks to select the best doctors for their members. The National Bureau of Economic Research has shown that the quality of care resulting in some of today’s narrow networks is notably better than broad networks.

Consumers aren’t turned off by the limited choices that narrow networks offer; health plans with associated narrow networks now exceed the popularity of other consumer health plans. The Kaiser Foundation found that 54 percent of uninsured or individually-insured people prefer the narrow networks.

“[Narrow network health plans are] going to be the norm rather than the exception,” said Joseph Berardo, president and CEO of health plan management company MagnaCare. “It’s not apparent to me that you can keep broad, fee-for-service networks and get to the payment reform everyone wants.”

For more on the reemergence of narrow provider networks, download Optum Trend Watch.

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