“Multi-Tiered provider networks will work best if an employer creates their own proprietary network on a direct basis rather than rely on third party intermediaries. Here is how it would work: Area providers are invited to enter into direct agreements with ABC Fence Company. They are given three choices: Tier 1 – 100% of Medicare, Tier 2. 125& of Medicare and Tier 3. 150% of Medicare. Plan participants who use Tier 1 providers pay less out-of-pocket than if they had used Tier 2 providers. Using Tier 3 providers would take economic courage.” – Homer G. Farnsworth, M.D.
Examining Multi-Tiered Networks to Minimize Premiums and Foster Consumerism
As health insurance premiums, copays and deductibles become unbearable, we’re often faced with clients who feel completely out of options during renewal conversations. They don’t want to switch carriers, but are out of levers to pull in order to control costs.
Now we’re seeing carriers step in with an interesting solution: multi-tiered networks that align with the motivations of providers and give employers an affordable option. These relatively new networks are popping up at premium rates considerably lower than competing plans.
To understand a tiered network, you must first consider that most doctors are paid based on number of patients seen each day, and not on the quality of care provided. Additionally, many doctors operate in silos that require repetitive medical tests resulting in extra costs borne by the insurance carriers – and eventually translates into higher premium rates. Multi-tiered networks address this: members are given access to providers who are reimbursed based on health outcomes and duplicate testing is eliminated.
Typically, these networks are comprised of two tiers. The first tier is made up of a small group of providers with compensation based upon outcomes. The second gives access to the much broader network of traditional fee-for-service providers. To incentivize patients to visit tier one providers, insurance policies require lower copays and deductibles than those required for tier two.
Multi-tiered networks are an opportunity for employers to promote consumerism in employees and create more efficiency in the healthcare system. From a premium perspective, the variance compared to a traditional single network is significant and is worth examining. From an employee communications perspective, it is vital to clearly lay out details of this concept to assist employees in making effective health decisions.
Categories: Employer Strategy, Healthcare News Tags: carriers, consumerism, coverage, health insurance, health outcomes, healthcare cost, healthcare coverage, multi-tiered network, networks,plan design, premiums, providers, tiered network, tiers
About Mike Dischley
Mike Dischley is a Vice President at Frenkel Benefits. He is an insurance broker with a decade of experience advising companies and individuals on all aspects of health, life and disability insurance. He manages small group division for Frenkel, serving more than 350 clients. His goal is to provide the highest level of service to his clients, and to continue to run a team that is effective, efficient, and accurate in its work.