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Limited health plans could improve care, reduce costs

July 7, 2015

Insurance plans that include only a subset of all hospitals and physicians in a geographic area can be tools for improving health care and controlling costs, La Follette School of Public Affairs Professor David Weimer and two co-authors suggest in an essay published in June in the Journal of the American Medical Association.

Photo: David Weimer

David Weimer

Insurance plans sold in the marketplace created through the federal Affordable Care Act often limit their hospital and physician networks, Weimer writes with Simon F. Haeder, a doctoral candidate in the University of Wisconsin–Madison’s Department of Political Science, and Dana B. Mukamel of the Department of Medicine at the University of California, Irvine. This in turn limits consumers’ choices and creates pressure for regulators to counter such restrictions.

Weimer, Haeder and Mukamel argue that recent research, including a study of California health care providers, indicates that such “narrow networks” may actually deliver less expensive care of equal or even higher quality. Rather than regulators limiting the ability of insurers to establish selective contracts, the authors say, they should tap the potential of these “narrow networks to foster improved health care quality and seek further cost containment.”

If insurance companies exclude hospitals that do not offer quality care, they may encourage competition based on hospital performance and keep costs low, the authors say. “Thus, using better-informed intermediaries — insurance carriers — to make better choices in terms of the quality of health care provided offers substantial opportunities for improved health outcomes and holds the potential for cost savings.”

The article is available online.