Network Design for Health Insurance Exchange Products

JoAnna Younts and Henry Miller write about health insurance exchanges and how commercial payers can create optimal provider networks under the Patient Protection and Affordable Care Act.

The creation of health insurance exchanges is one of the core elements of the 2010 Patient Protection and Affordable Care Act (PPACA). Exchanges will function as marketplaces for individual and small group health insurance products offered by private insurers. Although some states are developing their exchanges slowly and other states will cede the operation of their exchanges to the federal government, exchanges will be operational in all states by January 1, 2014. As a result, insurers that plan to offer exchange products need to design and develop new products specifically for this purpose. Because it is likely that exchanges will offer especially cost-competitive products, plans may elect to use limited or narrow networks to keep premium costs low. Limited networks are especially important because exchanges will offer products with predetermined coverage levels, which means that cost competition will rely heavily on the effectiveness of networks used for exchange products. Health plans need tools to select providers in order to assure that limited networks are cost effective.

In addition, there has been a resurgence of narrow and high-performance provider networks for other product offerings. In combination with tiered benefit plans and health reform, these networks are helping to reshape the commercial insurance market, as health plans redirect existing business into new types of plans, such as narrow-network/high-performance plans and accountable care programs. These options, along with those offered on exchanges, can provide increased value in terms of pricing, and potentially better patient care. Tools are needed to evaluate these provider selections as well.

The development of successful limited or narrow network products for both exchanges and non-exchange products requires effective modeling of costs, with additional consideration of access and quality. Ultimately, the most successful networks reflect collaboration between insurers and providers and offer well-planned access while delivering high-quality and controlling costs. Consumers have grown more accepting of these innovative arrangements.