To Network, or Not To Network? That is The Question.
Q: What do you get when you strip away the network from a health insurance carrier?
A: An expensive claims administrator
While certainly there are additional roles that insurance carriers fill, ultimately their biggest role is to manage the healthcare supply chain, largely through their network of providers. All of the other roles, from claims administration, insuring large claims, medical management, to management of the formulary can be filled by independent outside players. With that being the case, then it is easy to conclude that the most valuable asset any insurance carrier has is its network. Whether accessing a network as a fully-insured employer or through an ASO self-funded arrangement, customers of carriers pay for access to the network. Because of this, and that it is highly emphasized by carrier sales teams, it is very important for employers to understand what, if anything, makes a network valuable.
The two features of a network that carriers promote are the access and discounts it provides, so let’s take a closer look at each one. Today we will focus on Access:
This is the component of a network that is very easy to quantify, and simply put it refers to which providers are in the network and which providers aren’t. Having helped many employers through a carrier transition over the last two decades, access is one of the biggest concerns for an employer (specifically the HR Department who will face the complaints from employees whose doctor is no longer in network) prior to a transition. As managed care plans, like HMO’s and PPO’s, have evolved over the last forty years the networks have evolved too. Initially managed care plans had relatively limited networks but over time as carriers competed to offer greater access, the networks have grown to include the vast majority of providers in the markets they compete in. As costs have continued to rise, year after year, some employers are starting to question if unlimited access to all providers is all that important after all.
Although it is a significant departure from what employees have grown accustomed to, employers are starting to consider plans that offer “narrow” or more limited networks of providers in return for lower premiums. With the continued vertical integration of the health care supply chain, with insurance carriers buying health systems and health systems starting insurance plans, narrow networks will become more and more common. The question that employers must ask, however, is what criteria is being use to design the narrow network? Put another way, if half of all doctors graduated in the top half of their class, where did the other half graduate? In many cases those who are designing that narrow network have a vested interest in seeing patients remain in their health system and therefore design their network to do just that.
A narrow network is not a bad concept and we believe that to truly contain costs they are a must. That being said, they must be designed with using the right criteria, which must be fully transparent to employers and their employees. The fact is that health insurance plans are evolving and for many reasons narrow(er) networks are already becoming mainstream. Health insurance consumers who purchase coverage on the individual market already know this and have been conducting the cost benefit analysis of paying less in premium in return for a plan that has a more select group of providers.
From a group insurance standpoint, however, plans based upon a narrow network are still in the minority. Employers who have a Total Control Health Plan and have been armed with cost and quality data have been able to design their own narrow networks to ensure that the plan participants are able to access the best providers at competitive prices rather than simply the providers that benefit the owner of the network the best. Through approaches such as direct contracting and reference based pricing, along with the proliferation of narrow managed care networks, the value of the large carrier network is diminishing at a surprisingly rapid rate.