Health Insurance: What Is a Health Insurance Provider Network?

A Contracted Group of Health Care Providers

Patient in wheelchair talking to nurse in hospital
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A health insurance provider network is a group of health care providers that have contracted with a health insurance carrier (via an HMO, EPO, or PPO) to provide care at a discount.

A health plan’s network includes health care providers like primary care physicians, specialty physicians, labs, X-Ray facilities, home healthcare companies, hospice, medical equipment providers, infusion centers, chiropractors, podiatrists, and same-day surgery centers.

Health insurance companies want you to use the providers in their network for two main reasons:

  • These providers have met the health plan’s quality standards.
  • They've agreed to accept a negotiated discount rate for their services, in trade for the patient volume they'll receive by being part of the plan's network.

Why Your Health Plan’s Network Matters

You will pay lower copays and coinsurance when you get your care from an in-network provider, as compared to when you get your care from an out-of-network provider. In fact, many HMOs won’t even pay for care you received from an out-of-network provider except under extenuating circumstances. Even less restrictive PPOs commonly charge 20 or 30 percent co-insurance for in-network providers and 50 or 60 percent co-insurance for out-of-network providers, and tend to have higher deductibles and out-of-pocket maximums when you go outside the network.

An in-network provider bills your health plan directly, collecting only the copay or deductible amount from you at the time of services (for coinsurance, which is a percentage of the total amount—rather than a flat rate like the copay and deductible—it's generally better to ask the provider to bill the insurance first, and then your bill will be determined based on the negotiated rate that the carrier has with the provider).

However, an out-of-network provider might not file an insurance claim for you. In fact, many require that you pay the entire bill yourself and then submit a claim with your insurance company so that the insurance company can pay you back. That's a lot of money up front from you, and if there is a problem with the claim, you are the one who's lost the money.

An in-network provider is not allowed to balance-bill you. They must accept the contracted rate, including your copay or coinsurance, as payment in full or they’ll be in violation of their contract with your health insurance company.

But since out-of-network providers don't have any contract with your insurance company, those rules do not apply to them. In some states, an out-of-network provider may charge you whatever they choose to, no matter what your health insurance company says is a reasonable and customary fee for that service. Since your insurance company will only pay a percentage of the reasonable and customary fee, you will be on the hook for the entire rest of the bill with an out-of-network provider. Thus, an in-network provider is usually the best option.

Provider network changes under the ACA

The Affordable Care Act, which is facing likely repeal and replacement under the Trump Administration, requires health plans to cover out-of-network emergency services with the same cost-sharing they would use if the provider had been in-network.

But there's no requirement that the out-of-network emergency room accept your health plan's network-level payment as payment-in-full. That means the hospital is still allowed to balance bill you for the portion of the emergency care you received that wasn't paid by your health plan's network-level payment (you can see how this could happen, when you consider that health plans negotiate lower charges with their in-network hospitals, and an out-of-network hospital may not consider those lower charges to be adequate).

In the individual market (health insurance you buy for yourself, rather than obtaining from an employer or from a government program like Medicare or Medicaid), provider networks have narrowed over the last few years.

There are a variety of reasons for this, including:

  • Health insurance carriers have focused on seeking the providers that offer the best value
  • Smaller networks give carriers more bargaining power in terms of pricing.
  • Broad-network PPO plans tend to attract sicker patients, and the resulting claims costs are higher.
  • HMOs with gatekeeper requirements help insurers keep costs down, as opposed to PPOs where patients can opt to go directly to a higher-cost specialist.

Insurance carriers in the individual market can no longer use medical underwriting to deny coverage to people with pre-existing conditions (again, this could change under the Trump Administration), and the coverage they must provide is fairly uniform and extensive, thanks to the ACA's essential health benefits requirements. Carriers are also limited in terms of the percentage of premium dollars they can spend on administrative costs.

All of this has left them with fewer options for competing on price. One avenue that they do still have is switching from more expensive broad network PPO plans to narrow network HMOs. That has been a trend in many states over the last few years, and some states no longer have any major carriers offering PPO plans in the individual market. For healthy enrollees, this is generally not a problem, as they don't tend to have an extensive list of existing providers they want to keep using. But broad network PPOs tend to appeal to sick enrollees—despite the higher premiums—because they allow access to a wider range of specialists and medical facilities. Since health plans can no longer discriminate against sick enrollees by denying them coverage, many carriers have opted to limit their networks instead.

In some states, tiered networks are now available, with lower cost-sharing for patients who use providers in the carrier's preferred tier.

All of this means that it's more important than ever to review the details of your health plan's network, preferably before you need to use your coverage. Make sure you understand whether your plan will cover out-of-network care (many don't) and if they will, how much it will cost you. Make sure you know whether your plan requires you to get a referral from your primary care physician before you see a specialist, and for what services pre-authorization is required. The more you know about your plan's network, the less stressful it will be when you eventually need to use your coverage for a significant medical claim.

Updated by Louise Norris.

Sources:

Housedocs.house.gov. Compilation of the Patient Protection and Affordable Care Act. As amended through May 1, 2010.

Kaiser Family Foundation. Explaining Health Care Reform: Medical Loss Ratio (MLR). February 29, 2012.

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