Executive Summary: Network Deserts: Where Leased Networks Fail, Rural Access Collapses, and What the Alternatives Are
LFP-07.03 — The Geography of Level Funded#
Most level funded TPAs do not own networks. They lease access from national aggregators — MultiPlan, First Health, Zelis — that built their provider relationships in high-volume metropolitan markets. In rural and exurban areas, the directory may list providers who are not accepting patients, who are hours away, or who terminated their network agreements without the directory reflecting the change. Unlike marketplace plans, which must meet federal network adequacy standards under 45 C.F.R. § 156.230, self-funded ERISA plans face no comparable requirement. The member has no consumer protection equivalent to what applies to other coverage forms. The employer purchased coverage in good faith. The access failure is discovered in real time.
Directory accuracy compounds structural thinness. A 2018 CMS compliance review of Medicare Advantage plans found that 52% of physician listings contained at least one inaccuracy — and Medicare Advantage plans face federal accuracy requirements that self-funded plans do not. A 2025 JAMA study found that 40% of providers with inaccurate directory listings still had inaccurate information 540 days after initial identification of the error, even under the No Surprises Act’s 90-day update requirement for marketplace plans. Level funded plan directories receive less regulatory scrutiny than those.
Network deserts map to documented provider shortage designations. HRSA designates approximately 20% of the U.S. population as living in primary care Health Professional Shortage Areas, and over 60% of rural Americans live in designated mental health shortage areas — 65% of nonmetropolitan counties have no psychiatrist at all. The industries most commonly producing level funded employer profiles in the small group market, including construction, agriculture, energy extraction, and manufacturing, operate heavily in rural and exurban areas. A pipeline construction company with 35 employees in western Oklahoma is not an unusual level funded employer profile. Its workers operate in counties HRSA has designated as shortage areas.
Three alternative approaches exist, each with specific limitations. Reference-based pricing eliminates network dependence by reimbursing at a defined percentage of Medicare rates rather than under a network agreement, allowing members to seek care from any willing provider — but creates balance billing exposure the No Surprises Act does not fully address. Direct provider contracting can build functional access where leased networks have failed, but requires legal, contracting, and credentialing infrastructure that most small TPAs cannot sustain across dispersed rural geographies. Telehealth addresses primary care and behavioral health consultation but cannot substitute for surgery, advanced imaging, or specialist evaluation requiring physical examination.
A TPA that markets national network access to employers in counties HRSA has designated as shortage areas is making a representation the product cannot keep. Brokers must evaluate network adequacy at the county level before recommending level funded in any geography where the leased aggregator relationship was built for a different market.