Narrow networks: adoption growing among smaller groups

Kaiser’s latest employer benefits survey offers some interesting data on the adoption of narrow (or high performance) network products. See chart below:

Couple of observations:

  • Overall adoption at the firm level appears to stand at almost 20%.
  • The data probably under-represents the share of firms with a narrow network product: firms which have narrow networks in their second or third most common plan would not appear in this data. However, the share of lives in a narrow network product is probably lower: I would think narrow network products are adopted more frequently among employers offering several benefit options – therefore, the most prevalent benefit design will only have a slice of the lives in that firm.
  • Adoption grew in 2010 — when uptake was particularly concentrated among larger employers (greater than 200 employees) — and again in 2011 – particularly among smaller employers (less than 200 employees).
  • Why did narrow networks grow faster among larger companies? It may be that, because larger groups more often offer multiple plan options to employees, it was easier to put a narrow network product in place. Per the Kaiser survey, 42% of firms with greater than 200 employees had access to more than 1 plan vs. 15% of firms with less than 200 employees. Also, larger firms may have better equipped HR departments to manage the employee education required for a narrow network product. Other surveys have tended to confirm that larger groups have historically been more interested in narrow network products (see, for example, chart 12 in the Commonwealth Fund study of employer attitudes in 2006)
  • Under this theory, smaller firms tried other approaches to address cost but, as the economy continued to sputter through 2010, had to resort to narrow network products in 2011.
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