The post below is a guest blog from Joy Binkley who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.
In July, leading computer chip company Intel Inc. announced that it had decided to contract directly with a single provider system rather than working with a national commercial health insurer for 5,400 employees at its manufacturing plant in Rio Rancho, N.M. This single provider system will administer Intel’s benefits for eight health plan options and better manage the firm’s healthcare costs, according to officials.
The decision to implement this system garnered national attention since it showed that one of the largest employers in the United States believes narrow provider networks is one solution to controlling healthcare expenses. This trend is also growing in popularity among some employers in North Carolina. The theory is that by establishing access to a small network of top-line providers for certain scheduled healthcare procedures and operations, employers will be offering medical services at a lower cost to both themselves and their employees (the patients).
Narrow networks have gained prominence in the wake of a recent government report detailing how even within the same region, hospital costs can vary more than $200,000 for same procedure. With narrow networks, employers and insurers can overcome such wide differences in expenses by directing employees to more affordable treatment options. Controlling these costs will keep employees and employers from overpaying for services and help manage claims and out-of-pocket expenses, while still producing the best outcomes for patients.
Tiered v. Limited Networks
There are two main types of narrow networks – tiered and limited. With a tiered network, employers can continue to offer a large carrier network to their employees, but out-of-pocket costs will vary based on chosen facility or service provider. Under limited networks, the number of providers and facilities the consumer will have access to is restricted. If a member elects to seek care from a non-participating location or provider, his or her claims may fall out of network at higher cost or be completely excluded from coverage.
Regardless of the type of network chosen, employers are learning that employees would like guidance regarding where to schedule surgeries. Employees are just as frustrated as employers about overpaying for services that can be found at considerably lower cost at nearby facilities. At the same time, employers are using more in-depth health management through member advocacy groups or trained health professionals. This allows the employers to further review treatment options with consumers and make them more aware of what is involved with costs.
Given these facts, can narrow provider networks used by Intel and other employers really save costs substantially for other businesses? Can their goals and results be adopted by other employees and replicated elsewhere?
Results May Vary
Narrow networks may serve well for limiting healthcare costs for employers through scheduled services such as a knee replacement or MRIs. Catastrophic injuries and illnesses are by definition going to services, such as a knee replacement or MRIs. Catastrophic injuries and illnesses are by definition going to require specialized assistance, however, so providing a list of predetermined locations approved for certain types of treatments or surgeries will not help when emergency care is needed.
Having said that, limiting the network of providers may not yield the same results for all employers. This is due to three primary factors:
- Location – Little to no competition in a specific area often means minor cost variance for services, so limiting access will not impact overall cost. Most carriers are able to run a network comparison based on home zip codes to determine if these limited networks will be beneficial. A general rule of thumb is that there is more competition in urban areas than rural ones, so companies based in the latter likely will see little benefit with narrow networks.
- Level of engagement – Members may have to understand there will be more responsibility expected from them for their healthcare costs. Perhaps they will have to utilize a member advocacy program to get certain types of service pre-authorized before seeking care, or conduct their own price comparison for certain services. Regardless, more guidance will be required in the plan itself to help clarify the variance in cost versus outcomes.
- How your health plan members consume care – Employers need to be more informed of how employees within their own group have used provider networks in the past. At HCW, we offer clients with 100 or more employees a tool to analyze group-specific data about high-cost, high-diagnosis procedures and determine how much they are costing the business. The results of either approach may support or rule out using narrow networks.
Even if your business meets these factors, realize that employees may view narrow networks as providing fewer healthcare options than previously offered. Remember that you are gently guiding your employees into understanding why they may have visit a new healthcare provider to save costs. Some may have to travel further than in the past in order to meet the terms of these networks.
Data mining tools can be used to provide an analysis of where plan members are consuming the most cost. At HCW, we use such a tool to aid the discussion on determining if a narrow network may work in our client’s favor. We can also work with various carriers to determine if the limited network aligns well geographically to incent savings as well. Contact HCW if you have questions or would like more information on these services.
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