The Problem with Narrow Networks

According to a Consumer Reports survey, 44 percent of those who bought an Affordable Care Act (ACA) plan for the first time in 2015 reported that they did not know the network configuration associated with their plan.1 Purchasing a health plan without understanding its health care provider network could be medically or financially detrimental. Should a network not provide an enrollee access to the health care providers they wish to visit, the enrollee will be faced with foregoing care or being charged potentially high out-of-network costs. Nearly 70% of all ACA plan networks are narrow, meaning they include 25% or less of the physicians in the area. 2 Those enrolling in such narrow network plans should protect themselves by understanding how these plans work and the pros and cons associated with them.

What is a Narrow Network?

To understand a narrow network, it is important to understand what a network is in the first place. A health care provider network limits enrollees to a specific pool of health care providers (e.g. doctors, hospitals, labs, pharmacies, etc.) with whom the insurance company has negotiated contracted rates for medical services. McKinsey & Company define a “narrow network” as one that provides an enrollee access to less than 70 percent of hospitals in a rating area.3

Insurance companies use narrow networks to trim enrollee costs in an effort to compete for consumers with less expensive premiums. In exchange for delivering many enrollees to a narrow network, the narrow network gives the insurer more favorable rates for medical services. Consequently, the premiums for narrow network plans are on average 17 percent cheaper than premiums for broad network plans,4 and the most important factor for a consumer when choosing a plan is enrollee costs (i.e. deductibles, copays, and coinsurance).5 Although consumers are often swayed in purchasing these plans because of their lower premiums, they should be aware of the network restrictions associated them and how these restrictions can potentially affect care and out-of-pocket costs.

Obtaining Health Care in a Narrow Network

If you are enrolled in a narrow network plan, you will benefit fully from its cost-sharing if you stay in-network for medical care. However, a narrow network increases the risk that the you may seek care out-of-network if you develop a medical condition where the best care is not available in-network. Depending on the type of health plan in which you are enrolled, you may or may not have a cost-sharing agreement for seeing out-of-network providers. Below are examples of two common health plan models and their respective rules for out-of-network coverage.

  • HMO (Health Maintenance Organization) – Limits an enrollee to in-network providers. Any out-of-network medical expenses will generally not be covered by the plan except in the case of an emergency6 or a scenario where the plan was petitioned for out-of-network care and the plan formally approved the petition
  • PPO (Preferred Provider Organization) – Allows the enrollee to choose between in- and out-of-network providers but there are higher out-of-pocket costs associated with out-of-network care7

When searching for health insurance plans on a public marketplace, you will have access to the provider directories associated with each plan. The Affordable Care Act mandates that an insurance company provides an up-to-date directory of providers associated with a plan, which must be accessible via the public website on which the plan is listed.8 Consumers should use this before purchasing a marketplace plan to ensure that they will have access to the providers that they need. Purchasing a plan without researching its network could potentially be detrimental by severely limiting a enrollee’s access to affordable providers.

Why Might You Need Out-of-Network Care?

Although your health care costs may be significantly reduced by enrolling in a narrow network, your access to quality affordable health care may be as well. Those enrolled in a narrow network may find themselves needing to go out-of-network for care for various reasons. For example, if you develop a life threatening cancer and the best cancer treatment centers are not in-network you may be tempted to go out-of-network.

Some of the plans on the marketplace offer limited access to in-network specialists. Researchers at the Harvard T.H. Chan School of Public Health examined 135 Silver health plans being sold in 34 states on the website. They discovered that 15 percent of the plans had an absence of a physician in at least one specialty.9 This could be a serious issue for individuals with complex medical conditions. Accordingly, individuals should carefully research a plan’s provider directory before enrolling to ensure that they will have affordable access to the specialists they need to visit.

For those without complex pre-existing conditions, limited access to specialists could be a serious issue as well. There is always the risk that an individual will develop a health complication after enrolling in a plan. Should the plan they are enrolled in not have an in-network specialist in the area they need care, they may be faced with the prospect of high out-of-network costs.

Sometimes, at no fault of their own, enrollees receive ‘surprise’ medical bills for out-of-network costs. According to a Consumer Reports survey conducted in 2015, 30% of privately insured Americans received a surprise medical bill in the past two years.10 Surprise medical bills often happen when a patient undergoes a procedure and was not informed beforehand that an out-of-network provider would be involved. For example, a patient may go to an in-network hospital for a surgery but receive added out-of-network costs because the anesthesiologist was out-of-network. Although the hospital may be in-network, this does not guarantee all doctors within the hospital are in-network. Unfortunately, communication between the hospital, doctors, insurance company, and patient can be imperfect and lead to errors in coverage.

Problems When a Narrow Network Is Combined with No Out-of-Network Coverage

Typically, an insurance company limiting patients to in-network health care providers is only required to pay out-of-network costs in the case of emergency care or prior authorization. In the case of emergency care, the Affordable Care Act requires insurers to treat patient cost-sharing as it would for in-network charges. If seeking prior authorization for a health service, you or your doctor must complete an application to the insurance company. While it may be in the patient’s best interest the see an out-of-network health care provider, the insurance company has the economic incentive to direct the the patient to in-network providers.

For those cases that are not pre-authorized or qualify as an emergency, an enrollee may be responsible for paying all out-of-network costs with no assistance from insurance. Out-of-network care does not adhere to the negotiated rates of in-network care. For instance, HMO plans often have no out-of-network cost-sharing agreements or annual out-of-pocket maximums associated with out-of-network care.

Out-of-network costs can be substantial. According to a study by the AHIP Center for Policy and Research, prices out-of-network medical services in 2013-14 were on average 300 percent higher than the average Medicare rates for 97 common medical procedures.11 For some of these procedures, the price difference between out-of-network and Medicare was drastic. For instance, the average out-of-network charge for lower back disc surgery was $9,426, 938.5 percent that of the corresponding Medicare fee of $1,004.12

It is not rare for individuals to go out-of-network for health care so consumers should not think of such situations as fringe scenarios. The previously discussed study by AHIP, which compared out-of-network and Medicare costs for 97 medical procedures, was conducted by analyzing 18 billion health claims. AHIP estimated that the out-of-network costs for the 97 medical procedures alone was $3.2 billion.13 The national costs for out-of-network care is significant and consumers should be smart in protecting themselves from accruing such costs.

Term Health Insurance and Network Breadth

While more than half of ACA plans lack out-of-network coverage,14 all term insurance plans offered through AgileHealthInsurance have broad network coverage ensuring that an enrollee has access to quality health care providers. If an enrollee goes out of network and finds that the provider does not accept their term insurance, in many cases, the enrollee can get reimbursed by submitting their claim to the insurance company. To be sure, enrollees should check with their insurance company first.

Term insurance plan premiums are also significantly less expensive than unsubsidized premiums for health plans sold on the exchanges. Compared to the average costs for 2016 Obamacare bronze plans for individuals aged 30, 40, and 50, term insurance plans are 25 percent less expensive. Savings are greater for younger individuals without pre-existing conditions. For healthy males, aged 30, a term insurance premium is 54.93% less expensive than an Obamacare Bronze plan.15

It should be noted that unlike ACA plans, term insurance plans do not cover medical conditions that existed prior to enrollment.

It should be noted that unlike ACA plans, term insurance plans do not cover medical conditions that existed prior to enrollment.


Considering the prevalence of ACA insurance plans with narrow networks, consumers should heavily research plans before enrolling to ensure that they are not putting themselves at risk for high out-of-network costs.

For those needing broad coverage, term insurance may be a good option. 100 percent of term insurance plans sold on AgileHealthInsurance have out-of-network coverage. Enrollees in these plans can be ensured that they will have access to high quality providers without incurring unknown and potentially sizable costs.

  1. Surprise Medical Bills Survey. May 5, 2015. Consumer Reports.
  3. Ibid.
  4. Ibid.
  5. Public Health Insurance Exchanges. Deloitte.
  6. What You Should Know About Provider Networks. Department of Health and Human Services. Sep. 2015.
  7. Ibid.
  8. Final HHS Notice of Benefit and Payment Parameters for 2016. Centers for Medicare & Medicaid Services.
  9. Stephen C. Dorner, MSc; Douglas B. Jackobs, ScB; Benjamin D. Sommers, MD, PHD. Access in Marketplace Plans Under the Affordable Care Act. JAMA 2015; 314(16):1749-50.
  10. Surprise Medical Bills Survey. May 5, 2015. Consumer Reports.
  11. Charges Billed by Out-of-Network Providers: Implications for Affordability. 2015. AHIP Center for Policy and Research.
  12. Ibid.
  13. Ibid.
  14. Hospital Networks: Evolution of the configurations on the 2015 exchanges. McKinsey Center for U.S. Health System Reform. Apr. 2015.
  15. Premium Data for 2016 Shows that Term Health Insurance Costs 49 Percent less than Obamacare for Younger Enrollees. November 19, 2015. AgileHealthInsurance.