Narrow Provider Networks for Employer Plans
December 2016
EBRI Issue Brief #428
Paperback, 20 pp.
PDF, 1,599 kb
Employee Benefit Research Institute, 2016
Download Issue Brief PDF
Executive Summary
The authors conducted in-depth qualitative research to examine questions
around provider networks in employer health plans, particularly the development
of so-called gnarrow networks,h which have grown in the individual market
exchanges under the Patient Protection and Affordable Care Act of 2010 (ACA).
These narrow networks are characterized by offering considerably fewer health
providers than is typical in the group market, and they are formed primarily
based on price discounting.
The research includes the review of peer-reviewed journals, news sources, and
public policy reports; structured interviews with a convenience sample of human
resource benefit directors at 11 large employers; and field research by
health-policy experts in a dozen states.
This Issue Brief describes the research in more detail and analyzes
the reported facts and viewpoints. The major findings are:
- Narrow provider networks are receiving renewed attention, following their
increasing prominence in the ACAfs individual (nongroup) marketplace
exchanges, which are highly price-competitive.
- So far, this renewed interest in narrow networks has not translated
strongly to employers. For example, in 2016, only 7 percent of employers with
health plans offered a narrow network. Also, in 2014, employers ranked narrow
networks the least effective among several strategies to manage health
insurance costs.
- Reasons employers give for their subdued interest include absence of a
track record showing sustained (year-over-year) savings; concern about
antagonizing workers; spotty availability of narrow networks, especially in
rural areas; greater interest currently in other cost-savings strategies; and
reluctance to adopt substantial changes in benefit structures until the future
of the ACAfs so-called gCadillac taxh is resolved.
- There are signs that employersf interest in narrow networks may grow in
the near future. More than one-third of employers with health plans that have
5,000 or more workers now offer some type of alternative network, including
tiered or ghigh-performanceh networks. Field reports indicate increasing
adoption of narrow networks by both large and small employers, particularly in
urban markets around the country.
- Where narrow networks are offered, their adoption could be increased by
giving workers stronger financial incentives to consider them. Offering
workers a fixed (gdefinedh) contribution that does not vary by choice of plan
is one way to confer such incentives, and private exchanges are a way to offer
workers a broader range of choice. Currently, however, neither defined
contributions nor private exchanges are widely used by employers.