As employers strive to reduce healthcare costs, Tiered Networks and Limited Provider plans have appeared on the market. But are they right for your organization? Will they add value to benefit offerings, or will they confuse—or worse—cause anxiety for employees?
As with anything in life, the answers are in the details. If you decide one of these plans is right for your group, you can give it its best chance for success with a well-planned rollout, and by offering continual guidance throughout the year.
A 2010 study by the Massachusetts Attorney General concluded that there is no evidence to show a connection between higher payments and better care.
The first thing our clients want to know is how much they can save. Our data shows that on average, we’re able to help reduce annual premiums by 4-6% with Tiered Plans, while Limited Provider Networks may save an average of 8-12%. The next question they ask is what it means in terms of their healthcare choices. The answer to that is a little more nuanced.
Tiered Network Plans
Limited Network Plans
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.
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:
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.
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.
So, what do Tiered Plans and Limited Network Plans truly bring benefits administrators? With careful planning and employee education, they can help employers and employees save money without sacrificing quality of care. Put simply, they are an evolution in the continuous effort to contain costs. But they are far from the last word on the subject. Because believe it or not, there’s an even more radical option called Reference Based Pricing (RBP).
RBP seeks to provide completely transparent, fixed pricing on non-emergency procedures, and uses Medicare-negotiated prices as a benchmark. As such, it has the power to shake up benefit plans far more than Tiered and Limited options do. RBP has many nuances, and deserves an entire discussion devoted to it. So, stay tuned to Innovo’s News & Views for further information on this topic as it evolves.
• Train employees on how to be better healthcare consumers – all year, not just during open enrollment.
• Provide a list of low-cost facilities and doctors.
• Encourage the use of satellite facilities when they offer savings.
1 Based on actual savings of Innovo Benefits Group clients
2 The Kaiser Family Foundation and Health Research & Educational Trust Employer Health Benefits 2017 Annual Survey
3 Pew Research Center, FactTank News in the Numbers, April 11, 2018
4 Brookings Data Now, Thursday, July 17, 2014
5 Deloitte, Health Care Consumer Engagement, 2015
6 PwC Survey: US Workers Feeling More Financial Stress, April 19, 2016
7 Forbes, Student Loan Repayment: The Hottest Employee Benefit Of 2017, Dec 19, 2016