What Consumers Will Pay for a Broad Network Health Plan

As health plan costs soared one response was to winnow the field of available providers to those willing to take less money in exchange for (theoretically) more patient volume.  Whether or not a provider is in-network is a key factor in consumers’ health plan choice.  So how much more would a consumer be willing to pay for a broader network?  That question is explored in a study published in the Journal of Health Economics.   (JHE Article)   About 9% of employers offer a narrow network plan and 21% of plans on the insurance exchanges in 2017 had a narrow network design.  The authors used California’s health insurance exchange to ascertain what kinds of tradeoffs consumers appeared willing to make between premium cost and network breadth.  About 1.5 million residents of the state were covered by exchange plans in 2017.  The researchers had access to provider networks for the plans and to information about enrollees, including income and other demographic data.  The benefits in plans on the exchange, especially in California, are relatively standardized due to extensive (and very expensive) mandates, so competition is often along dimensions of price and provider availability.  Many consumers buying through the exchange, however, have access to premium subsidies, which may lessen their price sensitivity.  Network breadth for this study was solely based on primary care clinicians and the measure was basically the number included in a plan divided by the total number in the relevant geographic area.

California has fairly substantial competition among plans on the exchange across most of the state.  The large number of plans and plan types include various network combinations, but California regulations limit the ability to severely restrict provider choice by mandating maximum travel distances and times and setting minimum physician to member ratios.  The average network breadth on all offered plans was 16%, and the maximum was in the mid-20% range.  Across all groups people appeared to select more broad network plans, with the network breadth for selected plans being about 4 percentage points higher than the average for all offered plans.  And they also appeared to strongly favor lower premium plans, selecting plans with average premiums about $140 per month lower than the average premium on all offered plans.  The general primary finding is that the average household is willing to pay $46 per month to enroll in a broad network plan.  However, there is a wide range conditioned on various factors.  For example, a single person household with access to a premium tax credit and age 18 to 29 is willing to pay about $6 more for a broad network, but a person in the oldest group with the same characteristics is willing to pay $50 more.  So older people, who likely have more health needs and more established provider relationships, are willing to pay much more to maintain their freedom of choice among clinicians.  Other factors connected to selecting a broader network plan included higher income level and more people in a household.