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Narrow Insurance Networks -- Popular in NJ -- Extend to Relatively Few Providers

Analysts say new research will help consumers make tradeoffs between access and prices

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New Jersey was among the states with the largest share of health insurance plans that offered relatively little choice of doctors to individual consumers, according to a new research brief.

Two of three New Jersey insurance networks that were studied included fewer than 25 percent of the doctors in the state, according to researchers with the University of Pennsylvania. Networks that extend to relatively few doctors are known as “narrow networks.”

According to the study, New Jersey had the seventh-highest share of narrow networks in the country. Healthcare experts, however, say that narrow networks aren’t necessarily bad for consumers, who in the future may be able to use the data collected for the report to learn how many local doctors are in their insurance network -- and whether it makes sense to pay more for a larger network.

Analysts say that it’s important for consumers to have this information since they make difficult tradeoffs in deciding which plan is right for them. But they also note that it may be easier to find a doctor in New Jersey than in states with similar-sized networks, since the state’s small size makes it easier to find in-network doctors nearby.

Since the Affordable Care Act set a wide range of standards for the amount of coverage that marketplace health insurance plans must provide, offering narrow networks is one of the only tools available to insurers to lower costs. And while many consumers are eager to choose the least-expensive plan, they aren’t always presented with clear information. That’s one of the reasons why the Robert Wood Johnson Foundation funded the research by report authors Dan Polsky and Janet Weiner.

“The need for better information for consumers about networks is definitely higher when more of the networks are narrow,” Polsky said, noting that consumers are frequently surprised when they later find that a provider isn’t in their network.

Polsky said the data used in the brief could be the basis of an online tool allowing consumers to see how many doctors in or near their ZIP code are in a given network. He added that several organizations have already expressed an interest in similar ideas.

“It’s just a matter of time before this type of tool is created,” he said.

The data could also be combined with measurements of provider quality to give consumers a sense of the value of different health plans. For example, information compiled for sites like the Center for Medicare and Medicaid Services’ Physician Compare could be combined with information on the size of insurance networks to determine if a plan offers both high-quality doctors and an extensive network. While the researchers are not writing a similar report covering 2015, they plan to reexamine the marketplace networks next year.

Katherine Hempstead, who directs the Robert Wood Johnson Foundation’s health-insurance coverage work, said consumers should be able to choose narrow networks, but they also need information to make that choice.

“It’s not necessarily a bad thing to have a lot of narrow networks, but I do think the consumers need to be informed,” she said.

Hempstead also noted that consumers who choose narrow networks are at a greater risk of being treated by a provider that’s outside of their network. This can lead to surprise medical bills, the focus of legislation, S-20/A-4444, being debated in the Legislature that would put limits on out-of-network bills by requiring arbitration to resolve billing disputes; create a public index of in-network prices that would be used by arbitrators; and require providers to inform patients of potential costs.

Having narrow networks, “increases the stakes of trying to resolve that out-of-network” issue, she said.

Maura Collinsgru, health policy advocate for New Jersey Citizen Action, also said that narrow networks must be considered alongside the out-of-network issue.

“We have heard that we’re going to see a proliferation of these plans come 2016,” Collinsgru said, adding that it’s becoming more important for the state to audit insurance networks to ensure that they’re meeting the needs of patients.

Hempstead said, however, that New Jersey’s small geographic size can make it easier for patients to travel to in-network doctors even when the overall network covers less than 25 percent of the doctors in the state.

Top insurance-industry lobbyist Wardell Sanders questioned whether New Jersey’s marketplace plans truly have narrow networks, although some offer “tiered” networks -- in which patients pay less for some in-network providers than for others. Sanders added that the networks must meet the state Department of Banking Insurance rules for network adequacy, which he described as strict.

“You have to remember that consumers and employers say health coverage costs too much,” said Sanders, president of the New Jersey Association of Health Plans. “I would say that narrow networks are a response” to consumer demand. “It’s really just giving access to lower-cost sharing … and lower premiums.”

Sanders noted that that prior to the January 2014 launch of the federally operated marketplace, most consumers chose to buy barebones plans that provided “basic and essential” services, which were more limited compared with the covered services mandated under the ACA but which were also less expensive. Since insurers can no longer offer these plans, they lower costs to consumers by negotiating lower reimbursement rates with doctors that meet the insurers’ standards to participate in narrower networks.

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