The Effect of Narrow Provider Networks on Health Care Use

Network design is an often overlooked aspect of health insurance contracts. Recent policy factors have resulted in narrower provider networks. We provide plausibly causal evidence on the effect of narrow network plans offered by a large national health insurance carrier in a major metropolitan market. Our econometric design exploits the fact that some firms offer a narrow network plan to their employees and some do not. Our results show that narrow network health plans lead to substantial reductions in health care spending. We find sizeable decreases in primary care visits, prescription drug use and other ancillary services.