You can save a lot of money on your health insurance premiums. But, to do so, you’ll have to enroll in a plan that limits you to a relatively small number of providers. You might have to switch primary care physicians, or drive a long way to see a specialist. And you might not be able to go to that big-time teaching hospital that’s always in the news, unless it’s an emergency or you need a special kind of treatment.

Do you take the deal?

These days, lots of people are saying yes to that choice—and, when they do so, they may not be sacrificing the quality of the care they get. That’s the very tentative conclusion of a new study out on Monday.

The working paper, by economists Jonathan Gruber and Robin McKnight, is the first serious attempt to assess the pluses and minuses of “narrow networks”—and, in so doing, thereby address one of the most genuinely complicated controversies of the Obamacare era. Insurance companies like these narrow networks because it allows them to limit beneficiaries to providers that charge less money—which, in turn, allows insurers to demand that doctors and hospitals accept lower reimbursements. It’s a crude way to cut costs. But, absent the kind of system-wide price controls that liberals (like me) might prefer, it may also be the most effective.

The practice of creating narrow networks is not actually new. Insurers have been deploying this strategy on a wide scale at least since the 1980s, when they first introduced managed care. And while they backed off a bit following the 1990s, when consumers rebelled against HMO-style restrictions on care, in the last few years insurers have been introducing them again—as the pressure to hold down cost increases has grown. The approach has been particularly popular in the Obamacare marketplaces, because insurers figured that customers there would be shopping primarily on price.

So far, it looks like the insurers were right. Consumers are gravitating towards the cheapest plans (although they tend to prefer “silver” over “bronze,” most likely because silver plans entitle some people to additional financial assistance). But some consumers have been unhappy about the small networks in these plans. Doctors and hospitals have been even more angry, using the media and even the courts to pressure insurers into including them on their plans. Celebrated cases included some of the nation’s most prestigious hospitals, including, Cedars-Sinai in Los Angeles, Seattle Children’s Hospital and MD Anderson Cancer Center in Houston.


It’s been hard to know what to make of these stories, since media accounts tend to hype them without checking critical details—like whether people unhappy with limited network plans had other, albeit more expensive, options; or whether doctors and hospitals excluded from networks could justify the higher prices they wanted. Still, the underlying questions, about what effects narrow networks actually have, are real.

The Gruber-McKnight paper addresses those questions by analyzing three years of claims data from a unique, quasi-experiment that took place in Massachusetts. (You can read the paper if you want the details.) The conclusions are pretty provocative, as these things go. People who switched to narrow network plans saved both themselves and their employers huge amounts of money: Spending on medical bills declined by approximately one-third, according to the paper. Partly this was because people were getting care only from providers that charged less, Gruber and McKnight found, and partly that was because they were seeing fewer specialists.

That wasn't necessarily good news: In theory, it could have meant that these people were getting worse medical care. But Gruber and McKnight detected no evidence of that. The hospitals in the narrow networks performed just as well on typical measures of quality. And while people were using fewer specialty services, Gruber and McKinght write, these people were also spending more time with their their general practitioners and family doctors—and less time in the emergency room. That's exactly the kind of transformation many experts say is necessary.

The study comes with a ton of caveats, which Gruber and McKnight make very clear. It's still just a working paper, available through the National Bureau of Economic Research, which means it's yet to go through formal peer review. The people who opted for narrow network plans were slightly healthier, though not by a lot. The data on quality of care is all by implication—it’s judging whether hospitals have good records of following treatment protocls, for example, not whether patients are actually living longer. And it’s just one group of people, in one state. It’s not clear how applicable to other situations—where, for example, the networks might be smaller than they are in Massachusetts.

Still, the findings at the very least call into question the assumption that narrow networks mean worse medical care. “I think this research flies in the face of the presumption that narrow networks are saving money by sacrificing quality of care,” Gruber told me. “This is at least preliminary evidence that narrow networks don't limit access to primary care that is most cost effective for improving health.”

Keep in mind that some of the most respected health care orgnaizations in America, like Group Health of Puget Sound and Kaiser Permanente, have for decades restrcted patients to a limited 


The Gruber-McKnight paper did have one important wrinkle: Results were better for people able to keep their primary care physicians. That could be an argument for embracing or at least tolerating narrow networks, but also putting in place certain protections—like, for example, making sure networks are “adequate,” making sure insurers are being candid about who's in and out of their networks, and allowing people with serious chronic conditions to keep seeing doctors with whom they already have long-standing relationships.

The California state legislature just passed a bill extending some of those protections. (It awaits the governor's signature.) More such efforts are likely and they might be a good idea.