As we approach another period of Open Enrollment under the Affordable Care Act (ACA), it is a good time to revisit whether plan offerings reflect consumer preferences. Are exchange participants getting a good value?

In a recent survey, when asked to rank elements of a health plan that were most important to them, the most frequent response was low monthly premiums. The least frequently mentioned? Access to prestigious institutions.

Welcome to the new era of thin health plan networks.

Figure 1


Plans offered through one of the largest marketplaces developed for the ACA—Covered California—were largely built to meet this model: offering pared down, more cost effective provider networks. Perhaps the best measure of success may be the recently announced average premium increases in California — just 4 percent. But are consumers trading quality for a lower premium with narrower networks?

There have been a few studies looking at the narrow network model. A May Health Affairs piece, for example, found that Covered California plans did offer narrower hospital networks than comparable commercial offerings, but access and quality did not differ significantly. However, we felt evidence was still lacking on a few key questions:

  • Does the selection of measures of access and quality matter? If we use a broader set of measures, do results differ?
  • Is there variation in network quality performance (plan-product, network, region, or statewide)?
  • Did performance variation have any relationship with premiums?

The implications are significant. If no variation in network performance exists, and premiums are aligned with quality, consumers can base their choices on cost and personal preferences alone, confident that network composition has no bearing on relative outcomes.

Characteristics Of Hospital Performance With Different Methods

Working with an advisory panel of measurement experts and consumer advocates, we debated options for creating composite hospital quality performance scores. After intense discussion, the advisory group decided to evaluate two approaches using 59 available measures:

  • Policy-weighted composite: Based on perceptions of a measure’s importance to consumers
  • Reliability-weighted composite: Based on the statistical contribution of each measure to discriminating performance among the hospitals versus random measurement error

In the end, the different methods made little difference in performance evaluation.

While the lowest-performing plan-products had only one to three hospitals, other plans with very narrow networks had composite scores that were comparable to most other scores. There was no significant relationship between raw network size and performance.

Regional Variation

Perhaps the most interesting finding was the comparison of quality among and between regions.

Top-performing regions were significantly better than the lowest-performing regions; San Francisco consumers had better-performing networks than Orange or Kern residents. This is less a factor of narrow networks and is more closely related to a longstanding problem of more fragmented, lower-cost Southern California hospitals struggling to match the quality of their more heavily concentrated, better resourced Northern Californian counterparts.

Figure 2

Connecting Cost And Performance

Finally, we looked at whether premiums were related to hospital network performance. We were able to capture 2014 premium costs for all 19 regions. With evidence that different metal premium prices were strongly correlated, we selected a typical Silver Plan as the premium cost to analyze against network performance.

We found network performance explained about 25 percent of the variation in premiums. While higher premiums may suggest higher hospital quality, it is a modest relationship and may not be the driving force behind premium differences; other factors, such as physician performance or regional differences, may also influence the relationship.

Summing Up

Except for a handful of outlier networks, consumers can have confidence that the hospital care in their region is comparable to other plans’ product networks, and that network size does not seem to typically influence performance.

The major caveat is that some extremely narrow networks with overall lower-performing hospitals probably would benefit from a more inclusive network structure or a marked improvement in performance of the participating hospitals.