Hospital Networks: Perspective from Four Years of the Individual Market Exchanges Mckinsey Center for U.S
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Hospital networks: Perspective from four years of the individual market exchanges McKinsey Center for U.S. Health System Reform May 2017 Any use of this material without specific permission of McKinsey & Company is strictly prohibited Key takeaways The proportion of narrowed The trend toward managed Narrowed networks continue to 1 networks continues to rise 2 plan design also continues. In 3 offer price advantages to (53% in 2017, up from 48% in the 2017 silver tier, more than consumers. In the 2017 silver 2014). In the 2017 individual 80% of narrowed network plans, tier, plans with broad networks market, both incumbent carriers and over half of the broad were priced ~18% higher than and new entrants carriers network plans, had managed narrowed network plans offered narrow networks designs predominantly Consumer choice is becoming Consumers who select narrowed In both 2014 and 2015 (most 4 more limited. In 2017, 29% of 5 networks in 2017 may have less 6 recent available data), narrowed QHP-eligible individuals had choice of specialty facilities network plans performed only narrowed network plans (e.g., children’s hospitals) but, in better financially, on average, available to them in the silver the aggregate, have access to than broad network plans did tier (up from 10% in 2014) hospitals with quality ratings similar to those in broad networks Definitions of "narrowed networks" and other specialized terms can be found in the glossary at the end of this document. McKinsey & Company 2 1 The proportion of narrowed networks continues to rise Network breadth by carrier status Ultra-narrow Narrow Tiered Broad N = number of networks1,2 Incumbents are using more narrowed networks New entrants2 primarily used narrowed More than half of networks are narrowed networks in 2017 1,883 1,703 37 2,410 2,782 2,524 1,740 19 21 24 20 18 18 21 25 21 23 25 28 28 4 38 6 5 5 4 4 0 52 47 53 54 53 47 38 2016 2017 2017 2014 2015 2016 2017 Carriers that remained in the market New entrants National view in both years 1 Networks were counted at a state rating area level. 2 We counted a carrier that offers health insurance in two states as two carriers. A carrier was considered a new entrant in a given state if previously it had offered individual insurance only in one or more other states. Definitions of "narrowed networks" and other specialized terms can be found in the glossary at the end of this document. SOURCE: McKinsey Exchange Offering Database McKinsey & Company 3 The shift toward managed design is occurring 2 in both narrowed and broad network plans 1 Plan type by network breadth Managed Unmanaged N = number of networks2,3 954 1,123 1,061 845 1,144 1,548 1,301 798 44 42 57 59 65 69 77 82 56 58 43 41 35 31 23 18 2014 2015 2016 2017 2014 2015 2016 2017 Narrowed Broad 1 Plans based on health maintenance organizations or exclusive provider organizations are considered managed. Those based on preferred provider organizations or point of service are considered unmanaged. 2 Networks were counted at a state rating area level. Definitions of "narrowed networks" and other specialized terms can be 3 When multiple silver plans were available on a single network, we used the plan type associated with the lowest-price silver plan in that network. found in the glossary at the end of this document. SOURCE: McKinsey Exchange Offering Database McKinsey & Company 4 3 Narrowed network plans remain more price competitive1 Difference in median premium for broad vs. narrowed networks2,3 % 2014 11 16 16 17 2015 14 16 15 23 17 22 23 33 2016 18 18 19 35 2017 Bronze Silver Gold Platinum 1 More consistent price differences across metals may indicate that payors are increasingly basing network price on experience. 2 When a network has multiple plans, the lowest-price plan was used as the price of the network. If there were multiple networks available for selection as “narrowed,” the narrowest was selected. If there were multiple networks available for selection as “broad,” the broadest was selected. Definitions of "narrowed networks" and other specialized terms can be 3 Difference between plans within the same rating area, carrier, and plan type. found in the glossary at the end of this document. SOURCE: McKinsey Exchange Offering Database McKinsey & Company 5 3 Increasingly, broad network plans are less likely to be price leaders 1 Networks by price category and breadth Broad Tiered Narrow Ultra-narrow % of networks in rating areas with at least 1 narrowed network2 Lowest 37 8 29 26 34 6 32 28 30 7 37 26 17 7 45 31 price 0–10% above 44 13 26 17 44 7 27 22 38 5 36 21 33 5 36 26 lowest 11–35% above 46 6 25 23 52 4 26 18 48 5 26 21 43 2 30 25 lowest >35% 50 5 21 24 63 4 18 15 60 3 21 16 47 7 25 21 above lowest 2014 2015 2016 2017 1 Price category was defined as the premium gap to the lowest-price product. This is the difference between a network’s lowest-priced plan and the lowest-priced plan within the same metal tier in the same rating area. Definitions of "narrowed networks" and other specialized terms can be 2 Networks were counted at a state rating area level. found in the glossary at the end of this document. SOURCE: McKinsey Exchange Offering Database McKinsey & Company 6 In the 2017 silver tier, 29% of QHP-eligible individuals had 4 only narrowed network plans available to them Consumer access to network breadth among silver plans Broad only Narrowed only Both % of QHP-eligible consumers (N = 39 million) 10 10 12 16 5 10 15 29 80 85 74 55 2014 2015 2016 2017 Definitions of "narrowed networks" and other specialized terms can be found in the glossary at the end of this document. SOURCE: McKinsey Exchange Offering Database McKinsey & Company 7 While over half of ultra-narrow networks include an AMC, 5 less than one-quarter include a children’s hospital 1 Inclusion of academic medical centers (AMCs) No AMC AMC % of networks in rating areas that contain at least 1 AMC2,3 155 172 166 121 205 266 259 205 53 48 41 28 355 390 331 199 4 6 7 7 29 29 28 19 29 22 29 50 50 49 47 31 96 94 93 93 71 71 72 81 71 78 71 50 50 51 53 69 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 Ultra-narrow Narrow Tiered Broad 1 Inclusion of children’s hospitals (CHs) No CH CH % of networks in rating areas that contain at least 1 CH2,3 95 119 115 78 116 151 155 123 20 19 18 10 127 153 133 80 17 10 21 16 35 47 40 46 39 53 50 60 81 81 72 77 83 90 79 84 65 53 60 54 61 47 50 40 19 19 28 23 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 Ultra-narrow Narrow Tiered Broad 1 Counting networks at a state rating area level. 2 Carriers in any given year. Definitions of "narrowed networks" and other specialized terms can be found in the 3 Only tier 1 hospitals assessed. glossary at the end of this document. SOURCE: McKinsey Exchange Offering Database McKinsey & Company 8 Ratings data suggest there is little difference in hospital quality between 5 narrowed and broad networks 1 Hospital quality by network breadth Ultra-narrow Narrow Tiered Broad National average2 Weighted-average 2017 CMS hospital performance scores Clinical process Safety Efficiency N = 1,548 N = 1,462 N = 1,548 8.8 2.9 4.8 6.4 2.9 3.0 2.9 2.9 8.7 8.7 8.1 8.2 5.1 3.7 2.8 Patient experience Outcomes Total N = 1,548 N = 1,525 N = 1,548 10.1 8.1 33.3 8.6 10.1 10.4 10.1 8.0 8.2 9.5 34.8 32.3 33.7 7.5 30.2 1 Total number (N) of networks varies across the metrics based on CMS data availability. The “Total” score is a weighted average based on the number of inpatient admissions for each in-network hospital in a given network breadth. In 2017, CMS reduced the weights for “Clinical process” an “Outcomes” and added the “Safety” score. Definitions of "narrowed networks" and other specialized terms can be 2 Reflects all AHA hospitals participating in exchange networks for which CMS hospital performance data was available. found in the glossary at the end of this document. SOURCE: McKinsey Exchange Offering Database, CMS Hospital Compare Data 2017, 2016 American Hospital Association (AHA) Database McKinsey & Company 9 6 Carriers with narrowed networks performed better financially, on average Post-3R, post-tax individual market financial metrics among exchange carriers Weighted-average by QHP membership1,2 2014 2015 Post-3R post-tax Risk adjustment, Reinsurance, Risk corridors, Claims margins, % %3 % % PMPM, $ Ultra- -2 -6 13 -0.6 301 4 narrow -9 -11 8 0 292 0 -7 -3 17 307 Narrow5 -11 -2 12 -0.2 339 -8 0 18 0.5 346 Broad6 -15 2 13 -0.1 393 1 Carrier performance was determined at the NAIC/HIOS (plan ID) state and entity level. Analysis includes only entities HIOS ID’s associated with on-exchange plans in given year, with >1K 2014 QHP members.