When Obamacare handed insurance companies millions of compulsory customers, it also handed them a reminder of one of their industry's toughest realities: Consumers want low premiums, and they want to see any doctor they want. And it's impossible to give them both.
Generally, insurers selling plans on Obamacare's exchanges opted to keep premiums low, hoping the public would prefer a low upfront price tag—even if that meant customers couldn't always pick their first-choice doctor.
But "if you like your doctor, you can hope she's in our network" was always going to be a tough sell for insurers. With the insurance market now viewed through the distorted lens of the endless partisan fight over Obamacare, it's going to be harder than ever. Republicans have pounced on the narrow networks, citing them as further proof that President Obama lied when he said the Affordable Care Act would not cost people their doctors.
And as the volume of enrollees and rhetoric rises, insurers are worried about a possible backlash. Narrow networks are getting a bad reputation, and consumers may demand more choices.
It has happened before: In the 1990s, insurers hoped that by using health-maintenance organizations to move their coverage away from expensive doctors and hospitals, they could control health costs while creating an incentive for providers to lower their prices. What they created instead was a popular rebellion, with customers balking at the HMO plans and complaining loudly to Congress about it.
Some analysts see a similar climate brewing now.
"People don't like to hear 'no,' and this is saying 'no,' " said Austin Frakt, a health policy economist at Boston University.
That's clear from the Kaiser Family Foundation's latest tracking poll on the health care law. Among those the foundation surveyed, 51 percent said they'd prefer a broader network and higher premiums, compared with just 37 percent who preferred "a more limited range of doctors and hospitals" in exchange for lower premiums. And most of the 37 percent changed their minds once they were reminded that a plan with "a more limited range of doctors and hospitals" might mean the same thing as "you would not be able to visit the doctors and hospitals you usually use."
The administration is in a tough spot on network size. Republicans have laid the whole issue at Obamacare's feet, even though it's a market dynamic that Obamacare really didn't cause: It's a business balance between price and quality that existed long before the law was created.
But this market dynamic nevertheless exists within Obamacare policies, and the administration clearly wants to address a potentially unpopular part of people's coverage—without making that coverage more expensive, and thus accessible to fewer people.
"The administration has shouldered the blame for things that are so vastly beyond its control, and has attempted valiantly to work these problems out," said Sara Rosenbaum, a professor of health care policy at George Washington University.
Republicans have played up narrow networks in their criticism of the law, arguing that the prevalence of narrow provider networks invalidates Obama's promise that "if you like your doctor, you can keep your doctor." But that assumes you had a doctor to lose in the first place, and many of the people signing up for Obamacare didn't. According to New York state's exchange, about 70 percent of people who have picked a plan in the state were previously uninsured.
That's part of the reason insurers are still betting that narrow networks can gain traction.
In the latest Kaiser Family Foundation poll, 54 percent of the people most likely to be shopping for insurance through the Affordable Care Act's exchanges—those who are uninsured or who buy insurance on their own—said they'd rather have a low premium than a wide network of providers. Just 35 percent of the likeliest Obamacare customers said they would prefer a more expensive plan with a broader provider network.
And there are some substantive differences between the HMOs of the '90s and the narrow networks of today. For starters, HMOs made it difficult to see specialists, attempting to cement care around cheaper primary-care doctors. The ACA includes new tools designed to better coordinate care among hospitals, doctors, and specialists. It also requires plans to cover certain services that HMOs were able to limit.
Still, it's largely up to the states to determine whether an insurance plan's network is adequate enough to actually make those benefits accessible. And the Obama administration is at least sending a signal that narrow networks are on its radar, if not directly doing anything—yet—to forcibly broaden them.
The Centers for Medicare and Medicaid Services recently released new guidance for insurers about their networks. Its most tangible change was to boost the number of "essential community providers" a plan must include, from 20 percent to 30 percent. But the rule also hinted at closer scrutiny of plans' overall networks—without spelling out specific changes that would upset the balance plans have struck between access and cost.
The guidance says CMS will more thoroughly review networks to make sure they're "adequate," rather than simply taking plans' word for it. And what constitutes "adequate"? CMS won't say, and outside observers don't know.
"We don't know what that standard is," Rosenbaum said. "I have no idea what that standard is … this is like otherworldly, this thing."
Fear and Loathing in Arizona
This article appears in the March 1, 2014 edition of National Journal Magazine as Obamacare's HMO Problem.