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HMO-style networks making a comeback?


While health insurers are moving quickly to implement narrow provider networks to control costs, employers are waiting to see if limiting employees' options will trim spending as well as promote better outcomes.

Late last week, Blue Cross and Blue Shield of Minnesota said it will offer only a narrow-network HMO to state residents who don't have employer-sponsored coverage. Pointing to high costs and massive projected losses, the insurer said it will stop offering plans under its broadest networks.

More than 100,000 people will have to find new coverage for 2017, according to the insurer.

Blue Cross has company in shifting to narrow networks, which limit the doctors and hospitals that plan members can visit without paying out-of-network charges.

On public insurance exchanges established under the health care reform law, about half of all plans had a narrow network in 2014, according to a McKinsey & Co. study.

While employers' uptake of narrow networks is limited, experts say interest is growing.

“Really finding value is what employers are after,” said Trevis Parson, Philadelphia-based chief actuary of health and group benefits at Willis Towers Watson P.L.C. “That's the fuel for these narrow networks on the large-employer group side.”

According to a 2015 survey by the National Business Group on Health, 26% of large employers offered high-performance networks in some or all of their plans. High-performance networks are narrowed based on providers with the best outcomes and lowest costs.

Though uptake is slow, “there's going to be strong future,” said Steve Wojcik, vice president of public policy at the Washington-based NBGH. “Large employers are requiring their health plan partners to do more selective contracting so that they have these high-performance network-based plans available for their employees.”

“As an employer, you're looking at how the network differentiates itself on total value, which includes the delivery and customer service as well as price,” he said.

There are several barriers to employer adoption of narrower networks.

“The hard part is there's not a ton of high-performing networks out there (available to employers) that have demonstrated over time that they are effective,” said Dan Graovac, Boston-based principal of health exchange solutions with Xerox HR Services.

Large employers “need coverage across many states, and so oftentimes these broad networks are still the general preference of the employers that we work with,” Mr. Parson said.

While there's limited evidence that narrow networks indeed control costs while promoting value, “that data is emerging,” he said. “Early numbers appear promising.”

Until then, employers will likely wait and see. “They want to see evidence before they act. The last thing they want to do is disrupt employees,” Mr. Parson said.