Networks are a key feature of all insurance plans as every provider has a network. A network is a group of providers who have contracted with an insurer to get paid a certain set of rates for a certain set of services performed on the people who are insured by the company. Networks can be manipulated for positive public gains and for evil.
Networks are regulated at the state level for most insurance products and have some federal guidance for Medicare, Medicaid and Exchange products. The regulations are rather loose. In PPPACA, the networks for the Exchange must have significant concentration of providers in a wide variety of specialties so that residents of a county where a network is sold has “reasonable” access. This is a very soft definition because assembling a rule that makes sense for Loving County, Texas and Cook County in Illinois is extremely difficult. States will define network adequacy differently. Most states will have multiple standards depending on population density as urban areas will require more providers that are closer to the average resident while rural areas will allow long drives.
When networks are working for the public good, they provide a means of cost control as an insurance company will include in a network a provider who will take 120% of Medicare while it may exclude a provider who wants 220% of Medicare. This works because an insurance company can guarantee volume of patients at the lower rate. Networks are also a quality control metric. For instance, insurance companies may refuse to contract with providers who are not board certified or who have multiple large malpractice settlements against them in the past ten years. Contracts can be terminated for the loss of licensure or large malpractice settlements as well.
However, networks can be used against the public interest as well.
In a world where medical underwriting is no longer directly allowed, insurance companies will still want to find a way to avoid taking on risk or even worse, guaranteed high cost individuals. Network manipulation is one of the few viable ways of doing this that does not guarantee a very nasty series of investigative reports from the local television station and a seven part series in the daily news paper.
How does it work?
Let’s work through an example of a plan that is trying to minimize the number of Type 2 diabetics it is covering on the individual or Exchange risk pools. Type 2 diabetics tend to use a disproportionate number of endocrinologist, primary care provider, dietitian, ophthalmologist and podiatrist appointments. Manipulating primary care provider locations and access does not help out much as primary care providers are relatively cheap and are too useful for the rest of the risk pool. Futzing around with dietitians and ophthalmologists are an option, but again, they are reasonably cheap and unlike PCPs, they are reasonable low usage services.
The network manipulation to make a plan less attractive to Type 2 diabetics is two fold. The first is to recruit and maintain a large number of endocrinologists, but have a focus on reproductive endocrinologists or adrenal endocrinologists or whatever subspecialty of endocrinology that can treat diabetes does not have diabetes as a primary disease of concern. The more subtle manipulation would be to maintain a minimal number of podiatrists in the network, and keep the podiatrists that have nasty offices, rude receptionists and shitty hours in a bad neighborhood. This type of network design will make the insurance product less attractive to a person with Type 2 diabetes than a product with a broad, unstructured network.
Conversely, network and benefit design can be used to build a slightly healthier risk pool than the general population. Benefit design can be used to build a healthier network by offering to cover the health club dues of members. Adding the regional sports medicine center is also a network decision that will attract younger and more active members than the general population.