To keep premium prices down for individuals and small businesses buying coverage through new online marketplaces, insurers have created smaller networks of hospitals. But consumers and policy experts have wondered, just how small?
Turns out, many are very small.
“About two-thirds of hospital networks on the exchanges are narrow or ultra-narrow,” said Paul Mango, a director at the consulting firm McKinsey & Co., at a conference of insurance industry leaders in Washington Thursday.
Based on research he says it took his team weeks to develop, Mango said the majority of the lowest-priced insurance plans sold through the new online marketplaces use very small networks of hospitals. The study did not evaluate doctor participation in those networks.
The issue of whether doctors or hospitals are in a network is often of utmost importance to consumers choosing an insurance policy. But prices also are important.
Mango said his research looked at 20 urban areas representing about 25 percent of the uninsured. To develop a definition of broad or narrow, McKinsey identified the biggest 20 hospitals by their number of beds. Insurance plan networks with 15 or more big hospitals were tagged as broad networks. Those with 7 to 14 were considered narrow, and those with 6 or fewer of the top 20 were considered ultra-narrow.
But just because a policy has a narrow network, Mango cautioned, doesn’t mean it’s the lowest priced in the market. In fact, he said, the majority of ultra-narrow network plans were not the lowest priced in their regions.
Still, across the 20 areas evaluated, broad networks resulted in a median price that was 26 percent higher than the smaller ones, he said.
Michael Leavitt, who served as George W. Bush’s secretary of health and human services and now runs a consulting firm, said the ability of insurers to craft large or narrow networks — and the resulting demand for both in the marketplace — is “fundamental to the success of health reform.”
Some customers, he said, will want the lower prices that narrow networks bring, while others will gravitate toward broader choice even at the cost of higher premiums.
Mango said his group also analyzed enrollment data, finding that signups in four states — California, New York, Florida and Washington — make up about half of all enrollees and they tend to be older, rather than younger. The mid-level silver plans appear to be the most commonly chosen by consumers.
Enrollment so far in three states — California, Maryland and Washington — “skews toward the aged and mimics the background of the [current] individual market [policyholders], not the uninsured,” Mango said.
In an earlier McKinsey study, the firm found that premiums for similar policies in the same market can vary by as much as half, meaning that consumers would do well to compare prices before selecting. “There may be several potential factors contributing to these pricing differences within a given rating area, including the degree of network narrowing, different costs of care and different assumptions about the risk pool,” in terms of who will enroll.