Marketplace plans with narrow physician networks feature lower monthly premiums than plans with larger networks

Abstract

The introduction of health insurance Marketplaces under the Affordable Care Act has been associated with growth of restricted provider networks. The value of this plan design strategy, including its association with lower premiums, is uncertain.We used data from all silver plans offered in the 2014 health insurance exchanges in the fifty states and the District of Columbia to estimate the association between the breadth of a provider network and plan premiums. We found that within a market, for plans of otherwise equivalent design and controlling for issuer-specific pricing strategy, a plan with an extra-small network had a monthly premium that was 6.7 percent less expensive than that of a plan with a large network. Because narrow networks remain an important strategy available to insurance companies to offer lower-cost plans on health insurance Marketplaces, the success of health insurance coverage expansions may be tied to the successful implementation of narrow networks.