September 18th, 2014
With benefit designs and enrollee cost-sharing increasingly standardized across health plans under the Affordable Care Act (ACA), one of the remaining levers plans have to differentiate themselves—and to control premiums—is the size of their provider networks. Regulators have been caught in a crossfire between advocates of narrow networks who say they promote quality and keep prices down, and those who feel narrow networks could constrain access to necessary services.
Unfortunately, recent federal guidance – addressing, among other related items, the issue of “reference pricing” — blurs the distinction between in-network and out-of-network providers and may make it more difficult for regulators and consumers to understand the effective “size” of a particular network.
This confusion could undermine the goal of improving transparency in consumers’ health care choices and make it difficult for consumers to use prices in choosing providers. More troubling, expanded use of “reference pricing” under the guidance could leave patients paying unexpectedly large out-of-pocket amounts for services provided by ostensibly in-network providers.
Below, we characterize reference pricing as a “sub-network” contracting strategy, and we describe some of the implications of reference pricing and the guidance for consumers, regulators, plans, and providers.Read the rest of this entry »