Economic pressures of ACA individual insurance market reforms tear at fabric of provider networks

The Patient Protection and Affordable Care Act’s reforms of the individual health insurance market removed tools health plan issuers historically utilized to control costs such as medical underwriting, unlimited annual cost sharing and lifetime limits. That has left health plan issuers one main tool: using the market power represented by their plan memberships to negotiate lower reimbursement rates with providers while maintaining quality of care. Those providers who don’t play along can find themselves left out of provider networks. That naturally functions to narrow plan networks.

The Affordable Care Act permits the standardization of benefits within metal tier actuarial value rating levels. California’s health benefit exchange, Covered California, has opted to standardize benefits to facilitate consumer comparisons of plan benefits and costs. The exchange has also chosen to actively negotiate with health plan issuers and affirmatively select which plans will be included among its qualified health plans (QHP) for a given plan year. In a state as large as California, that gives the exchange real negotiating power given the number of covered lives it can potentially bring to the table. Plan issuers that want on the exchange must reach an accommodation with Covered California on premium rates and providers as well as their own providers — while at the same time convincing regulators their plans offer a sufficient selection of providers.

Striking that balance since the Affordable Care Act reforms began to be felt in 2013 was never easy and could be getting a lot tougher. Something eventually has to give to resolve the economic tension. When a complex system like America’s private health care market is placed under stress, stress fractures first appear at its weakest links and components. Particularly given that the Affordable Care Act has welded shut most of the escape hatches. In this case, it appears to be a rent in the fabric of the provider network, described by the journal Health Affairs (and reported here by The Los Angeles Times). The issue of plan members having difficulty connecting the providers has caught the attention of regulators. (See this recent, in depth Health Affairs policy brief for a detailed discussion. As it should since if the fray grows into a larger tear, it could prove fatal to the Affordable Care Act’s individual insurance market reforms.


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  1. Patrick Pine

    So here is where Republicans will have a problem with their preference for health care to function under a capital competitive market. Presumably buyers will subject providers to pressure to compete on price just as is the case in other markets. Presumably that will mean narrower networks, too.
    If I have no way to put price pressures on providers, prices aren’t coming down. If we do not allow narrow networks we can’t get lower prices. We can’t have it both ways.
    I support much of the ACA but differ with the supporters and regulators on this issue – the ability to have narrower networks may be the only way to get lower pricing and eventually costs.

  2. Frederick Pilot (Post author)

    The Health Affairs policy brief cited notes consumers are generally on board with the tradeoff of narrower networks in exchange for lower premiums. The danger is the networks shrinking down to the point that they fundamentally undermine the value of their health plan. After all, it’s not worth much re providing peace of mind if few providers will accept it.

    Another question that’s raised is when do provider networks become so narrow that they become de facto integrated plans like Kaiser Permanente?

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