Getting surprise bills from doctors and other providers who are outside your health-insurance network is one of the more unpleasant trends in coverage these days, especially for plans purchased through the Affordable Care Act's marketplaces.
But a new study published Tuesday in Health Affairs makes clear that so-called narrow networks of physicians do come with lower premiums: 6.7 percent lower, on average.
"I was actually surprised that it wasn't larger," said health economist Daniel Polsky, executive director of the University of Pennsylvania's Leonard Davis Institute of Health Economics and lead author of the paper. For most people, the savings are considerably larger: when government subsidies that the vast majority of purchasers receive were factored into the calculations, plans with extra-small networks cost 22 percent less than those with large networks, Polsky said.
"And then," he said, "the question becomes, 'Is this tradeoff worth it?' "
Network sizes tend not to be among consumers' biggest complaints. Costs – both premiums and out-of-pocket spending on deductibles and co-pays – are listed as bigger concerns. But one of the most frustrating experiences for patients in narrow networks is getting stuck with a hefty bill they had no idea was coming because, for example, the anesthesiologist for a procedure by an in-network surgeon turned out to be out of network.
Research has found that the complexities of health insurance are difficult for many consumers to grasp. And lists of in-network providers posted by insurers have often contained errors.
Accuracy has been improving, and the Department of Health and Human Services has emphasized updating network lists. When the fourth season of open enrollment begins Nov. 1, the department will launch a pilot program in four states that will include a measure of network size with each plan description at HealthCare.gov.
But even that will be limited to networks of adult primary-care providers, pediatricians, and hospitals, HHS announced last week. A small study by Harvard researchers last year found that nearly 15 percent of marketplace plans it examined lacked in-network physicians for at least one specialty. Endocrinology, rheumatology, and psychiatry were excluded most often, and about half the plans did not cover medications prescribed by out-of-network physicians.
Limited networks are not new. But the health law, which sought to level the playing field for purchasers, banned many of the practices that insurers had used to save money: charging higher premiums based on health conditions; limiting annual and lifetime benefits; and excluding major coverage categories, such as pregnancy.
Among the few money-saving strategies left to health insurers was restricting the size of physician and hospital networks.
"I think it's a legitimate area of competition, because some people are only focused on price and either don't have [medical] problems currently and are not attached to any particular providers, or they are willing to switch providers or switch drugs," said health-policy expert Timothy Jost, an emeritus professor of law at Washington and Lee University.
He added, "There is not necessarily a correlation of cost and quality in medicine."
A link between cost and network size has long been assumed, however. Previous research found that health plans with restricted hospital networks tend to be cheaper. The new Penn study, the first comprehensive look at physician networks, used a database containing details on networks covering most U.S. counties. To measure the effect of network size, the researchers controlled for a range of factors, such as local market competition and population demographics, that could influence cost.
"Extra-small" networks, which they defined as containing less than 10 percent of the physicians practicing in an area, cost 6.7 percent less than plans with "large" networks (40 percent to 59 percent of physicians). "In a market with an average-price plan, this percentage reduction could save an individual between $212 and $339 a year, depending on his or her age, and it could save a young family of four up to $692 a year," they wrote.
But the time required to collect and analyze the data meant that it was based on information from 2014, the first year of the ACA marketplaces, when insurers were making educated guesses about the rates. "It's unclear how much we can extrapolate," said Sabrina Corlette, a research professor at Georgetown University's Center on Health Insurance Reform.
Details of plans offered in the marketplace's fourth year will not be available until Nov. 1. But the market will be quite different, as several companies have pulled out. Just one carrier, Independence Blue Cross, will sell plans through its subsidiaries in the Southeastern Pennsylvania market; just two carriers, AmeriHealth and Horizon Blue Cross Blue Shield, will offer plans in South Jersey.
Corlette said it was unclear whether the departures would have much effect on premiums or networks. IBC and Horizon were already their areas' dominant carriers.
If narrow networks save money, they could entice more consumers to buy insurance through the marketplaces and help stabilize them. But as policymakers study the issue, they must grapple with a series of unknowns.
Does a narrow network "improve your health or hurt your health?" Polsky asked. Are health systems in a small network better able to manage your care? "There is a lot more that we need to know."