What is meant by "network" in health insurance?

In the context of health insurance, "network" refers specifically to a collection of healthcare providers that are contracted with a health insurer to deliver services to policyholders at reduced rates. The design of a network is critical in managed care plans, such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), where the insurer negotiates lower fees with providers in exchange for the promise of patient referrals.

By establishing a network, insurers can maintain cost control and ensure quality of care by directing members to preferred providers who have agreed to set pricing structures. This arrangement benefits both the providers, who gain more patients, and the insured individuals, who often pay lower out-of-pocket costs when they use network services compared to out-of-network services. Thus, understanding the concept of a network is essential for anyone involved in health insurance, as it impacts coverage options, costs, and the availability of care.