Association for Public Policy Analysis & Management

Objective: Tiered and narrow provider networks are mechanisms implemented by health plans to reduce health care costs. The benefits of narrow networks for consumers usually come in the form of lower premiums in exchange for access to fewer providers. Narrow networks may disrupt continuity of care and access to consumers’ usual source of care. Our research objective is to estimate consumers’ willingness to pay for continuity of care and network breadth, and how such measures change according to consumers’ health risk.

Study design: This study uses data from health plans in a single-carrier private health insurance exchange (HIX) offered by a regional carrier headquartered in the Midwest, and claims and enrollment data from consumers enrolled in such plans. This study uses the characteristics of health plans (cost-sharing levels, availability of a Health Savings Account, network breath, plan premiums, and employers’ premium contributions) and consumer characteristics (demographics, health risk) to estimate a discrete choice model; consumers choose among five mutually-exclusive health plans (one broad PPO plan and four narrow-network plans) at several enrollment periods. Consumers’ usual source of care are the provider network with the plurality of the share of office visits for each type of care, identified with medical claims; continuity of care occurs when the health plan covers the consumers’ usual source of care. A mixed multinomial logit models estimates taste coefficients for plan and consumer characteristics, continuity of care, and premiums net of employer contributions in the consumers’ health plan decisions. With these taste coefficients we estimate measures of willingness to pay for continuity of care and network breadth.

Population Studied: Individuals enrolled in the private HIX between 2012 and 2015.

Principal findings: We find that consumers value continuity of care; monthly willingness to pay for a network that covers their usual source of care is between $84 and $275 for primary care and up to $115 for specialty care depending on the patients’ health status. In addition, we find that, given that a network covers their usual source of care, consumers show aversion only to the narrowest networks. This aversion is strongest for the healthier consumers, who are less likely to have existing specialty relationships and therefore may be more concerned about future choice of specialty providers.

Conclusions: Consumers value continuity of care in order of thousands of dollars per year. But once the health plan covers their usual source of care, general network breadth is valued for those in relative good health in the smallest networks.

Policy Implications: Network adequacy regulations aim at setting an ‘adequate’ network size. Our results show that access to usual source of care is more valuable to consumers than network breadth in general, and that only the smallest networks are too restrictive for consumers once continuity of care is assured. This suggests that consumers are unlikely to move to from broad to narrow networks, despite network adequacy, if continuity of care is not available. Moreover, network adequacy regulation should aim to guarantee continuity of care rather than a minimum network size.