In contrary finding, buyers favor ‘narrow’ networksNews added by Benefits Pro on November 1, 2013

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By Dan Cook

As the insurance exchanges get up and running, carriers are offering narrow packages designed to keep costs down — something everyone assumes consumers want.

A massive survey by a team of Booz & Co. researchers, however, clearly shows consumers are instead drawn as much by the narrowness of their choices as by the low cost.

“Many studies have concluded that consumers will be highly price-sensitive when they shop on insurance exchanges. In response, insurers have created new products that keep prices down by aggressively limiting the doctors and hospitals where patients can go for care. Not surprisingly, these so-called ‘narrow’ networks have been met with sharp criticism from advocacy groups, reform skeptics, and providers,” authors Sanjay B. Saxena and Nate Holobinko write in a blog post on the Harvard Business Review.

“Although the narrow networks that make up today’s first-generation exchange insurance products are largely designed to maintain low premiums, a more significant opportunity exists for network innovation and redesign around the attributes consumers actually value in their providers,” they say.

That’s because their research unearthed the unanticipated finding that consumers believe their narrower choices will result in a more consumer-focused relationship with their healthcare provider.

The Booz researchers surveyed more than 20,000 consumers to come up with the conclusions. Here are their key takeaways:

“A small network with a high-quality system was far more coveted than other networks with a broader array of choices.”

“Consumers care more about having a high-quality hospital system than having their own primary care physician (PCP) in their chosen network.”

“The upper-tier brand of hospitals and health systems widely believed to be required in any network — well-known facilities, academic medical centers, and/or flagship institutions — are not always ‘must-have”’ to consumers.

The researchers were taken aback by all three of these results. And yet, upon reflection, they decided perhaps those truths had been there all along, but simply not properly excavated.

“Initially, we too thought consumers would favor the broadest networks that offered the most choice,” they wrote. “And our early research appeared to confirm that significant price discounts (often as much as a 10-15 percent reduction in premiums) would be required to persuade consumers to purchase a generically described narrow-network product. However, as is the case with political research, we found that it’s all about how you ask the question.”

The researchers turned the lens on the choice questions, “using hypothetical bundles of actual hospitals and health systems in their local market” to determine preferences. That’s when they began to hear a different story.
“Packaged goods makers and retailers have long known that too much choice can actually inhibit consumers and reduce their satisfaction with their decision,” they said. “Similarly, consumers worried about receiving care for an unknown illness at some point in the future, find more comfort in knowing they will receive high quality care from a discrete set of facilities than in pondering a sea of options with little expertise in how to make sound decisions.”

The same thinking informed choices when it came to saying goodbye to one’s beloved PCP.

“Having an in-network PCP is half as important as having a good hospital system in network and represents less than 5 percent of the value consumers attribute to their health insurance.

“While a dedicated patient/PCP relationship was once sacrosanct, today’s consumers are increasingly comfortable with getting primary care at retail clinics (e.g., CVS, Walgreens, Walmart, and Target) or using online and tele-health services that are quicker, more convenient, and often more cost-effective than a traditional office visit.”

That’s not the only counter-intuitive observation in the report.

“While (hospital) reputation remains an important factor in consumers’ decisions, our research indicates that many safety-net and local hospitals are also well-regarded by consumers — and in particular by those who are currently uninsured. As such, lower-cost, high-value networks designed around these ‘lower-tier’ institutions could be attractive and desirable offerings for consumers.”

Conclusion? Critics of low-cost, narrow-choice insurance exchange packages better rethink their barbs. They may be way out of tune with the everyday consumer, especially folks who’ve had trouble finding or maintaining their insurance.

“Taken at face value, these three findings run contrary to the truisms that have governed provider network design for the better part of 30 years,” the researcher said.

Originally published on
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