PPACA and the narrowing network

By Adam Berkowitz

Caravus, LLC


The concept of a provider network is essential to managed care. Insurance plans contract with select providers of health care services, promising an influx of insured patients in return for a discount on the cost of care provided. Once limited to a few hospital systems within a region, provider networks can encompass all 50 states, and plans compete based upon size and scope of participating care providers.

As the Patient Protection Affordable Care Act’s (PPACA) many provisions take hold in 2014, insurance companies will have less room to manage escalating premium costs. The PPACA’s new restrictions on deductible sizes and out-of-pocket limits paired with no medical underwriting for individuals and small businesses applying for coverage will push costs even higher. One of the few avenues left for insurance companies to provide competitive premiums is to tightly manage their provider networks.

With the health insurance exchanges open for business, many products offered are going to have limited provider networks. Having fewer hospital systems and physicians participating in a plan means a more captive audience for those remaining providers. And that means hospitals could be more inclined to accept reduced reimbursement for services. Steeper discounts mean plans pay out less in claims costs — ergo, reduced premiums that plans charge members.

While the concept of a narrower or limited network of providers is not new, the forces of health care reform could certainly drive enrollment in these plans. Those shopping for coverage in these new markets should pay close attention to the list of hospitals and doctors that are covered and how non-network benefits function. While members typically receive out-of-network benefits from their health plan (deductibles and out-of-pocket caps are typically less generous), they can be on the hook for excess charges that the insurance plan will not reimburse. Consumers should consider what they value most out of their health plan and what the trade-offs are by enrolling in a health plan with fewer care providers.