Why Employers Should Consider Tiered & Limited Networks

The Heart of the Matter – Price Variance

Provider Cost Drives the Market

All medical practices, labs, and hospitals are run differently, paying different salaries, rent, and supply costs. Their business expenses vary, even if they are in the same city.

Adding to that are operational differences – some providers are better, or more efficient, at seeing and treating patients. For example, an MRI at Hospital A may cost $1,500 while the exact same service at Hospital B may cost less than $800. Because of these types of disparities, insurance carriers have created plan options to incentivize members to choose lower cost providers.

If those bottom-line costs were the only variable, finding the least expensive option would be simpler. But there’s another layer of complexity. If you’re comparing multiple carriers, you may notice that each offers access to a specific provider, however that provider might appear in different tiers for each plan. For instance, a hospital that is featured in a less costly tier from Insurer A might be in a more expensive tier from Insurer B. Why? Each insurer ranks hospitals on different criteria. Additionally, each insurer has negotiated its own rates, and brings smaller or larger subscriber pools, which affect bargaining advantage.

Employee Education

Once employees start to see that they can directly affect the cost of their healthcare, they begin to understand the challenge that benefits administrators experience – balancing the best possible care with the lowest possible cost. Here, proactive education can mitigate the negative perception that these new benefits will be substandard or protracted from previous offerings.

Help employees make more informed choices:

• Highlight the differences between healthcare costs.
• Encourage them to research plans thoroughly.
• Provide example scenarios, i.e. What medical services will you likely need and what would they cost under each plan?
• Provide them with tools to find network PCPs, specialists and surgeons based on hospital affiliation.
• Show them that Tiered and Limited plans, despite their names, provide quality care that meets rigorous industry standards.

The introduction of Tiered and Limited plans is also an opportunity to show healthcare as one component of the overall benefits package. For instance, if employees elect a less-expensive option, this may free up company funds to provide other benefits. It’s up to benefits administrators to assess which triggers will steer employees toward preferred choices.

If a company’s wages lag behind local or industry norms, offering employees a share of the healthcare savings may be the best incentive. If a substantial portion of a workforce has student debt, perhaps an education loan repayment plan is the right carrot.

As you would expect, incentives appeal to various employee segments differently, some willing to compromise to save money, some preferring convenience or use of “marquee” providers. Often, the choices are generational.

Millennials Vs. Gen Xers & Boomers

Traditionally, younger employees are outliers in the healthcare formula, and it’s no different when it comes to Tiered and Limited plans. For Millennials in excellent health, there’s little reason to choose more expensive options. They are likely paying down student debt, planning travel, or saving for their first home.

Gen Xers or Boomers might differ from Millennials in that they have to consider their own history and comfort level with their primary care physician, spousal preferences, and children’s pediatricians. Additionally, if they are managing existing health issues, a more expensive plan may be worth it if it delivers the care and peace of mind they need.