Many States Not Prepared to Regulate Health Plan Networks

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By Sara Hansard

A Trump administration proposal could result in wide disparities among health plan provider networks in the U.S. because many states aren’t prepared to set adequate network standards.

That’s the assessment of health-care industry analysts and stakeholders interviewed by Bloomberg BNA about a provision in a Department of Health and Human Services proposed rule published Feb. 17 that would move power to states to regulate network adequacy.

Narrow networks emerged as a major point of contention when the Affordable Care Act exchanges first opened in 2014 as insurers limited access to many major hospitals, primary care providers and specialists in their plan networks to keep costs and premiums down. Republicans have called for shifting power to reform the U.S. health-care system to states, and the Trump administration’s first ACA proposal would start that process with the network adequacy provision.

More Variation in State Approaches

If the proposal is finalized, “There’s going to be more variation in terms of state approaches and potentially what consumers can expect from state to state,” Cara Kelly, vice president of health policy consulting firm Avalere Health, told Bloomberg BNA. Kelly was a health insurance specialist in 2010-2011 in the HHS Office of Consumer Information and Insurance Oversight, which is in charge of health insurance regulation and the ACA federal exchange.

“I read the proposal as reverting back to the year-one standard,” Kelly said. When the exchanges opened in 2014 the Obama administration initially deferred to states to review networks included in exchange plans as well as other individual and small group plans covered by the ACA.

Since 2014 the HHS added requirements to the network adequacy standards for plans sold in the federal exchange, which is in operation in 39 states in 2017. Currently those plans must meet standards limiting the time and distance enrollees must travel to reach health-care providers, requirements which would be dropped under the proposed rule.

Market Share Rising for Narrow Networks

According to a survey by McKinsey and Co., among people who purchased new health plans in the individual market in 2016, the third year the ACA exchanges were operating, the share who bought narrow or tiered network plans rose to 45 percent, up from 34 percent in 2015.

However, respondents to the McKinsey survey cited having their preferred doctor in their network as one of the top factors in influencing their purchasing decision. State regulators have focused to a great extent on requiring insurance carriers to keep accurate, up-to-date provider directories.

“In some ways states are better positioned to understand local market dynamics, geography and providers,” Kelly said. But some states allow insurers to file plans without pre-approval or they rely on market conduct reviews or attestations from health insurers that their networks are adequate, she said.

Health plan attestation or file-and-use standards may not be as strong as other forms of regulation, since they often result in regulators trying to deal with problems after they’ve been reported.

2015 NAIC Model Act

State insurance regulators have called for giving states flexibility to implement their own network standards rather than relying on a “one-size-fits-all national standard.” In November 2015 the National Association of Insurance Commissioners (NAIC) revised its network adequacy model act to apply the standards to preferred provider organizations in addition to health maintenance organizations, which had already been covered.

States have the option to adopt NAIC model acts, and as of the end of 2016 many states had not taken recent action to update their network standards, according to the organization’s most recent survey.

States weren’t expected to adopt the NAIC model act in full, Justin Giovannelli, associate research professor in Georgetown University’s Center on Health Insurance Reforms, told Bloomberg BNA. All states have some laws or regulations regarding network adequacy, he said. “It would be a matter of harmonizing” state laws or regulations with the NAIC model act.

But, Giovannelli said, “There’s a lot of concern that really cuts across party lines” in how health plan networks are crafted.

“Folks from across the spectrum are interested in how that’s developing and whether it’s regulated well,” he said.

States Would Have `Complete Control.’

The HHS proposal would give states “complete control over the oversight of network adequacy, except if a state didn’t have the legal authority or was not inclined to conduct oversight,” Giovannelli said. In those cases accreditation by the National Committee for Quality Assurance, URAC or the Accreditation Association for Ambulatory Health Care would suffice, he said.

“It’s highly likely everyone will be approved, and that’s the end of the oversight,” Giovannelli said. “In a lot of ways I think it’s unfortunate.”

Health Benefit Plan Network Access and Adequacy Model Act

Most exchange consumers have chosen the cheaper, narrow network plans, and surveys have found they are generally satisfied with their plans, according to a Feb. 2 report co-authored by Giovannelli. “If they have adequate information about plans, narrow networks might be the right choice for them,” he said.

But relaxing current network rules and farming out oversight to accreditation agencies won’t be an adequate replacement for federal scrutiny, Giovannelli said.

Washington State

Washington state was active in implementing network regulations as it became clear that exchange carriers were relying more on narrow networks, Insurance Commissioner Mike Kreidler told Bloomberg BNA. “In some areas we exceed in consumer protections in our rule,” compared to the NAIC’s model act, he said.

“There was a lot of screaming and yelling about it” from carriers, providers and other stakeholders, Kreidler said. But in retrospect industry stakeholders “grudgingly acknowledged it’s much better to have a strict standard so when you evaluate one carrier’s networks to another they all have the same standard,” he said.

“Otherwise they start gaming the system” by including too few types of some providers who might attract sicker patients, Kreidler said.

Some States `Grudgingly’ Adopting Standards

The HHS proposal won’t have a big impact on Washington state, Kreidler said. But other states are “still grudgingly coming into network adequacy standards,” and they may be inclined to bow to pressure from issuers and providers, he said.

Narrow networks that have high performance standards can be a good way to keep costs down, Kreidler said. Insurers could strike deals with some types of providers, such as orthopedic surgeons, to get a better rate for increased volume. “We want to encourage that,” he said.

But Kreidler said he is “more in favor of having a national requirement” than turning regulation over to states.

Other state officials disagree. It makes sense to leave most responsibility for network adequacy at the state level, Tyler Brannen, health-care policy analyst in the New Hampshire Insurance Department, told Bloomberg BNA.

Rhode Island Versus Wyoming

“If you’re looking at a very urban state, like Rhode Island versus Wyoming, you wouldn’t have the same standard,” Brannen said.

All health plans in New Hampshire, individual as well as group plans, typically included all of the state’s 26 hospitals before the ACA exchanges opened in 2014, Brannen said. It was difficult to sell policies unless all hospitals were covered since most of the state’s communities only have one hospital, he said.

But in 2014 Anthem Blue Cross and Blue Shield of New Hampshire sold the only individual product on the state’s federally facilitated partnership exchange, and the plan included only 16 of the 26 hospitals, Brannen said. Anthem has since expanded the number of hospitals it covers on the ACA exchange, he said.

The state is working on updating its network adequacy rules based on the 2015 NAIC model act and hopes to have new rules ready by 2018, he said.

“People buying exchange coverage have struggled gaining access to in-network providers,” Brannen said. “That’s been a problem with price-sensitive products.”

Brannen doesn’t think the HHS proposal will change network adequacy rules much at the state level. However, “For states that might be struggling with how to put together some standard and are just beginning to think about what they’re doing, they maybe could use more guidance.”

Lower Essential Community Provider Requirement

In addition to dropping the federal time and distance standards, the HHS proposal would reduce the number of essential community providers that exchange plans would have to cover. Essential community providers are publicly funded clinics that serve low-income or specialized populations, including federally qualified health centers, native American health centers and Ryan White HIV/AIDS Program clinics.

Exchange plans must currently cover at least 30 percent of the essential community providers in their geographic areas as well as all native American health facilities, Trish Riley, executive director of the National Academy for State Health Policy, told Bloomberg BNA. The proposed rule would roll back the coverage requirement to 20 percent, she said.

It can be difficult to predict which states may have tighter network standards, Katie Allen, executive director of the Council for Affordable Health Coverage (CAHC), told Bloomberg BNA. The CAHC is a coalition of employers, pharmaceutical companies, insurers, patient groups and physician organizations who mission is to lower health costs through increased competition.

States that have problems with access to providers, such as large states with rural populations, are likely to be more active on network regulation, Allen said.

In 2014 South Dakota voters approved by a 62 percent margin a ballot initiative sponsored by three South Dakota doctors allowing any health-care provider to join an insurance company’s network if the provider agrees to the insurer’s terms and works within the insurer’s coverage area, a concept known as any willing provider.

America’s Health Insurance Plans said that ballot initiative would limit consumer choices in the state by making it less likely that health plans could offer narrow network plans, which are usually less expensive than broad network plans.

Network Adequacy

“I could see a state that has a lot of providers not having as much concern or focus” on network adequacy, Allen said.

New York state, which operates its own ACA exchange, “has work to do in this area,” Elisabeth Benjamin, vice president of health initiatives for the Community Service Society of New York, told Bloomberg BNA.

The state’s standard for all counties, including Manhattan, is only three primary care physicians in a network, Benjamin said. “That’s an absurdly low number for New York City, which has 9 million people.”

New York is “essentially using the same standards from the mid-'90s,” Benjamin said. “We believe that this area needs to be modernized.”

Back to `Pre-ACA’ Standards

The proposed rule’s network adequacy proposal “takes us back to pre-ACA” standards, Riley said. “It would end the standardization and return to the states the determination of network adequacy that health plans have to meet.”

“There is some legitimacy to that,” Riley said. “Consumers have better access to state regulators than they do to federal, and they have a better capacity to work with legislatures and impose network adequacy standards,” she said. “Those legislators and regulators listen to consumers.”

The HHS proposal “will raise again the issue of narrow versus robust networks,” Riley said. States have few tools to constrain the cost of health care, she said. “Narrow networks is one of them.”

If narrow networks are designed around high quality, with good quality measurements and transparency, “There’s something to be said for narrow networks,” Riley said. But there are questions about whether quality data is adequate, she said.

“Consumers come to these issues in a very schizophrenic way,” Riley said. “They want choice and robust networks but cheap premiums. Regulators would say you can have one, not the other.”

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

For More Information

The Department of Health and Human Services' Feb. 17 market stabilization proposed rule is at

McKinsey & Co.'s Understanding consumer preferences can help capture value in the individual market is at

The NAIC's Health Benefit Plan Network Access and Adequacy Model Act is at Information on state action on the model act is on pages 35-38.

Regulation of Narrow Networks: With Federal Protections in Jeopardy, State Approaches Take on Added Significance is at

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