Dan Polsky and Bingxiao Wu have a new article in the journal, Health Services Research, that looked at the trade-off between network size (both hospital and physicians), hospital quality and premiums on the ACA individual market. They are looking at the 2016 individual market.
We find the following statistically significant results: a one standard deviation increase in physician network breadth was linked to a premium increase of 2.8 percent or $101 per year; a one standard deviation increase in hospital network breadth was linked to a premium increase of 2.4 percent or $86 per year. There was no significant association between premiums and hospital network quality, as measured by hospital star ratings and the inclusion of teaching hospitals or the top‐20 hospitals nationwide.
The simpler version is that bigger networks are associated with higher premiums by $7 or $8 per month. We know that the ACA insurance markets are extremely price sensitive, as the marginal buyer is buying almost exclusively on premium. We know that broad networks are modestly valued by consumers and adversely selected.
The interesting to me finding is that big, broad hospital networks are not correlated with hospital network quality.
This was slightly surprising to me.
I would have thought that narrow networks that were primarily trying to compete on price would also be trying to leverage a narrow network to screen out individuals whose net of risk adjustment residual costs were above revenue. At least in 2016, this was not happening on a systemic basis.
Instead the take-away is that narrow networks can drive down premiums without effecting one measure of quality.
This is interesting!