Narrow networks: Will you be in or out?

Taking the tiers out of tiered networks, insurers are setting up plans that include certain physicians but leave out ones they consider low-ranked doctors.

By Emily Berry — Posted Oct. 4, 2010

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Businesses increasingly are demanding that health insurers build networks that could leave some doctors out in the cold.

In a reversal of the long-standing trend of promising workers a broad choice of physicians and hospitals, more employers are willing to give up some degree of choice in their health plan networks if doing so means lower premiums.

Joe Zubretsky, chief financial officer of Aetna, the country's third-largest private health plan by membership, spoke to investors Sept. 14 in New York and summed up the trend this way:

"Employers are saying, 'Look, open access, choice, freedom of movement around the system, in or out of the system, was great when trend was manageable and the economy was good,' " Zubretsky said. "Employers are willing to limit choice to create a better cost advantage."

He said employers are willing to risk forcing employees to change physicians if it means that the company can adopt a narrower network and save on premiums.

What businesses say they want -- and what insurers are promising -- are networks made up of fewer but higher-quality physicians.

Whereas tiered networks offer incentives to patients who see "preferred" or "high-performance" physicians, or charge higher co-pays for visits to lower-tier doctors, narrow networks don't pay for care from anyone other than those physicians deemed as efficient and high-quality. By definition, a network can't be narrow without leaving some doctors out.

Big health plans on board

Large insurers, including Aetna, Cigna, Health Net, UnitedHealth Group and WellPoint, and other BlueCross BlueShield-affiliated plans, have talked publicly about their customers' growing interest in narrow networks.

In the 2009 National Survey of Employer-Sponsored Health Plans conducted by benefits consulting firm Mercer, 14% of employers said they use "high-performance" networks.

Narrow networks are in some cases geographic -- made up of doctors deemed to be the best in a city or region -- or in other cases based on specific criteria. For example, Health Net created a network called Salud con Health Net, which includes "culturally competent" physicians who are supposed to provide better care for Latino members.

Where networks are supposedly quality-based, it's unclear that all insurers are offering physicians a chance to understand why they're included or excluded, or disclosing the measures by which the network is selected.

Tiering systems have come under criticism from organized medicine, including a letter written by the American Medical Association and other medical associations to insurers, demanding that they submit their physician cost-ratings systems to independent review. That follows studies showing that such programs, as constituted, are likely to be rife with inaccuracies, a conclusion insurers dispute.

So raising the stakes by excluding certain doctors from networks could raise new concerns about the accuracy of ratings. The narrow networks typically are offered with assurances that they include all the best physicians and hospitals.

"The thing that employers are worried about, especially in this recession, is getting value for the money and controlling cost, not by sacrificing quality but by finding better management," said Regina Herzlinger, DBA, a professor of business administration at Harvard University and an advocate of consumer-directed health care and transparency in health care quality.

Businesses big and small are interested in narrow networks because they seem like the perfect solution to the dilemma facing employers: a way to make sure workers stay healthy, get high-quality care and save money at the same time.

A desire to push employees to the best physicians and hospitals came together with an economy that allowed businesses to go against the grain, restricting choice, said Laurel Pickering, executive director of the New York Business Group on Health, a coalition of New York-based companies interested in improving health care quality and reducing cost.

"Before, they were against doing anything that would disturb employees. ... I think the economy allows employers to do things they don't normally get away with."

Profits could increase

Fortuitously for health plans, narrow networks could provide increased profit opportunities. At an investors conference in March, Health Net CEO Jay Gellert had this to say:

"We are beginning to see demand in response to the concern among employees that they've had enough of cost shifts ... so they're willing to accept tighter management, different networks and structures like that in order to successfully gain broader coverage," he said. "That product provides margin expansion opportunity."

For Health Net, based outside Los Angeles, narrow network products cover about 40% of its small groups.

About 142,000 Health Net members are in narrow network products, said Larry Tallman, vice president of sales for Health Net of California. "This concept is the fastest-growing product in California."

Health Net has set up three levels of narrow networks -- Gold, Silver and Bronze -- as well as its Salud con Health Net product. The Gold, Silver and Bronze networks are local and made up of the highest-quality physicians and hospitals in a given city or region, Tallman said.

Employers know that quality measurement is imperfect, but they believe it's good enough to use to shape narrow networks, said Helen Darling, executive director of the National Business Group on Health.

Business leaders think that physicians' "style of practice" -- how likely they are to order tests or prescribe certain drugs -- drives up the cost of health care, she said.

Using a narrow network strategy to deal with that difference in care has yet to be proved, but employers at least feel ready to try it out.

"If we are right about both hypotheses, about quality and practice style, then the best network should deliver the highest quality at the most reasonable price," Darling said.

Quality measurement questioned

But even some of the businesses and groups that most strongly advocate for quality and efficiency-based networks will admit that the measurement behind the current narrow networks is limited in its accuracy and precision.

The more health plans take this approach, the hope is that physicians who don't make the cut will improve their performance, Pickering said. "We're not there yet."

Health plans are supposed to be working toward more accurate and reliable quality measurement programs.

In late 2007, many large insurers signed on to a legal settlement with New York Attorney General Andrew Cuomo after he called them out for creating tiered or narrow networks based on cost alone but marketing them as quality-based. Over several months, the major health plans doing business in New York agreed not to base ratings solely on cost and to disclose their methodology.

Then, in April 2008, still more insurers signed a nonbinding but highly publicized Patient Charter agreement, again pledging to always base tiered or narrow networks on robust, standardized quality measures, not only in New York, but everywhere they do business.

Since 2008, insurers have continued to introduce and expand quality ranking programs, prompting further resistance from physicians who say insurers' methodology is still not reliable or accurate.

In 2009, the Massachusetts Medical Society sued the Group Insurance Commission, which purchases health insurance for state and some municipal employees. The GIC requires insurers to place physicians in tiers according to quality scores, but physicians say the ratings are unreliable and that confusion about the scores has cost them patients.

In September, the California Medical Assn. filed a lawsuit trying to block a "Blue Ribbon" quality recognition program that Blue Shield of California introduced in June. Doctors said the data and methodology behind the designation are flawed, and that physicians who didn't qualify for a blue ribbon would lose business.

Now, years after promising to develop or improve quality measurement programs, health plans say they can measure quality well enough to offer narrow networks based on both cost -- often referred to as "efficiency" -- and quality.

Multiple studies released this year by the RAND Corp. have supported physicians' assertions that it's easy for physicians to be misclassified under cost-based rating systems. The AMA and other groups have cited those studies as reason for insurers to rein in tiering and rating programs until they can produce accurate and reliable results.

Herzlinger said the narrow network model presents risks beyond inaccurate ratings.

She worries that if insurers contract only with integrated systems -- hospitals that own physician practices -- the financial arrangement would lead to "cookbook" medicine.

"If I were a doctor, I would be hugely worried my freedom would be severely constrained under that arrangement," she said. "From a public policy point of view, this is not a very good idea. From a physician's point of view, I think it is very worrisome. They will lose professional autonomy. Particularly if a group bids a price, then the group says, 'Here's your price and, furthermore, here's how I want you to practice.' "

Herzlinger said this kind of narrow network would bring back some of the worst aspects of the old HMO-style managed care.

"If the big oligopolistic [integrated delivery networks] dominate markets, there is no question that we are back to old-style HMOs," she said.

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Less choice, lower premiums

Narrow networks can be limited by geography, quality ranking or even "cultural competence." Doctors who don't meet quality or cost standards, and even doctors whose offices are outside a certain geographic range, might be excluded. Here are some examples:

Blue Cross and Blue Shield of Florida: Miami-Dade Blue: The Miami-Dade County government asked the Florida Blues to set up a product for uninsured residents at a low premium but featuring reasonable coverage and a low deductible. Enrollees must live in Dade County. The Blues plan set up a narrow network of local physicians and hospitals who agreed to care for members at a discounted price. The plan said it screened participating physicians and hospitals to make sure the product's network featured high-quality doctors. Miami-Dade Blue, which was launched in July 2009, had about 3,900 members as of August 2010.

Health Net: Salud con Health Net; Silver and Bronze networks: The California-based health plan has set up small regional networks throughout the state, called Silver and Bronze networks, made up of physicians and hospitals that the health plan deems both efficient and high-quality. The Silver plan was first offered in July 2009; the Bronze network went live a year later. Health Net also runs Salud con Health Net, a network launched in 2000 and marketed to Latino members as featuring "culturally competent" physicians and hospitals. According to the company, about 142,000 of its members are in narrow networks.

Sources: Health Net, Blue Cross and Blue Shield of Florida, Aetna

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