Resources & Insights

New Day for ‘Narrow Networks’?

January 16, 2017

Employers’ use of what are known as narrow provider networks may soon widen.

That, at least, is the conclusion of a study by the Washington-based Employee Benefit Research Institute that found businesses are giving narrow networks renewed attention in their pursuit of cost savings.

narrow networks
CCIG’s Scott McGraw.

These networks, which limit health plan enrollees to fewer doctors and hospitals, are mostly seen on the insurance exchanges set up under the Affordable Care Act. Whether those exchanges survive the repeal-and-replace efforts under way in Congress remains to be seen. But insurers were forming these networks even before the establishment of the ACA.

Still, despite predictions to the contrary, narrow networks haven’t taken off for a number of reasons, including employers’ reluctance to antagonize their employees by restricting their health care provider choices. After all, President Obama came under withering fire for assuring Americans that, under the ACA, “if you like your doctor, you can keep your doctor.”

On the other hand, individuals who have gotten their health care coverage through one of the exchanges have in many cases had to accept – some would say they were forced to accept – narrow network plans to control premiums.

At the moment, just 7 percent of employers offer narrow networks, according to a national poll.

EBRI thinks that could change.

Its research, it said, found that more than one-third of employees with 5,000 or more workers in their health plans now offer some type of alternative network, including tiered or “high-performance” networks. These are seen as steppingstones to acceptance of narrow networks.

EBRI said that it also found that several of the major national carriers (e.g., UnitedHealthcare, Aetna, Cigna) are offering employers narrow or alternative networks, covering at least several dozen metropolitan areas, as do many state-based Blue Cross and Blue Shield plans.

In its research, EBRI also came across several state-based reports that reflected growing interest among employers. For example:

  • In Illinois, narrow networks were reported as being “increasingly popular.”
  • In New York, “there has been a dramatic growth in the offer and take up of plans with narrow networks,” mainly by small employers.
  • In Massachusetts, a statutory requirement that most insurers offer an alternative network priced at least 14 percent below their standard network has produced a 19 percent enrollment growth in these plans over a period of two years, to reach 400,000 people in 2014 (Center for Health Information and Analysis, 2016).

How quickly employers large and small adopt narrow networks will no doubt depend at least in part on how much money can be saved.

According to the human-resources professionals and others that EBRI surveyed, savings of 25 percent or more would be needed to motivate a broader adoption of narrow networks by employers or individuals. Savings that significant may only be possible in states that pass the sort of rules seen in Massachusetts.

Until that happens, if it ever does, employers can consider other strategies.

Among them is the adoption of financial incentives for employees who select narrower networks. Under such scenarios, workers who opt for a plan that offers the widest choice of providers end up paying the full difference in cost between the narrow network and the more expensive choice they’d made.

Premiums for single and family coverage each increased on average about 3% in 2016 — near historic lows but still above inflation and the average employee’s raise. The average family premium, which includes the amount contributed by both the employer and the employee, was $18,142 in 2016. Individual employee coverage cost an average of $6,435.

Assuming essential quality is maintained, that should be more than enough justification for any business wanting to bend the cost curve by shifting to a narrow network.

Scott McGraw is Vice President of CCIG’s Employee Benefits division. He can be reached at 720-330-7924 or

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