Understanding the difference between narrow networks and tiered networks
Health insurance premiums and other health care costs have been on the rise for years, leaving many businesses searching for more cost-effective ways to provide employees with health benefits. Many of these businesses are looking at two types of health plans that offer such savings: narrow networks and tiered networks, both of which are strategies found in self-funded insurance plans.
These aren’t exactly new; both have been available for decades, with tiered networks predominantly used by hospital systems. But they’re quickly growing in popularity. Today, close to 20% of large employers now offer narrow network health insurance plans.
Are they worth considering for your company and employees? Here’s what you need to know.
What is a narrow network?
In a narrow network, also known as a curated network, “a company contracts with a selected or curated list of high-quality, high-performing providers and hospitals,” said Lisa Janis, assistant vice president for network management for Northwell Direct. “The selected providers offer comprehensive care to members at a negotiated lower cost.” Those providers know that by offering a financial incentive, while still offering quality performance health care services, they are likely to see an increase in patient volume.
In a narrow network plan, the health care provider lists may be smaller, but the fact that it’s curated may result in better health outcomes along with lower premiums. “During the analysis and decision-making process, an employer needs to ensure that the network has sufficient providers in both primary care and specialty care that are easily accessible where members live and work,” said Ms. Janis. Putting in that legwork means “you’re still meeting all of an employee’s health care needs.”
See what's new with Northwell Direct.
What is a tiered network?
A tiered network plan, in contrast to narrow ones, is a broader network, offering access to a larger list of medical providers within the plan. The providers are placed in tiers based on their ability to offer high-quality, affordable care. Physicians and hospitals that offer higher quality care at lower costs receive a tier-one ranking, the highest and preferred tier. These provider groups will be the least costly for employees in terms of copays and other cost-sharing. In a tiered plan, said Ms. Janis, “employees have the flexibility to go outside the main tier and use providers in other tiers, with the understanding that cost shares can increase.”
It’s important to note that in tiered provider networks, insurers carefully screen and select (or curate) providers. “With a tiered network you’re less likely to over-insure members for services they may never want or use,” said Sandy Balwan, MD, chief medical officer for Northwell Direct. One study found a 5% reduction in medical spending when employees use tiered networks.
Which provider network option is right for your company and employees?
These steps can help your company determine whether a switch to a narrow network or a tiered network makes fiscal sense for everyone involved.
1.Do your research. Conduct a disruption analysis, a report that shows how a provider network change will impact, or disrupt, the care your employees are currently receiving. The goal, of course, is to preserve access to employees’ preferred providers as much as possible. “Your curated network might not have all of the hospitals within a certain geographic area,” Ms. Janis said. “This is acceptable as long as employees have the coverage and access to specialists they need while seeing cost savings.” An insurance broker or benefits consultant can help with this assessment. Also do a financial analysis: The goal is to compare your current employee claims, network pricing, and out-of-pocket costs with the new pricing if you switched to a narrow or tiered network.
2.Consider how a network change will impact employees’ health, not just their paychecks. One of the many benefits of switching to a curated network, according to Dr. Balwan, is the ability to lower prices without sacrificing quality health care. Because there are fewer providers, each has a vested interest in improving the overall health of the members they serve. “They’re dedicated to building relationships with their patients and coordinating care with other doctors within the network to address gaps in care,” Dr. Balwan said, such as making sure patients get important preventive screenings or vaccines. Many curated networks also offer enhanced benefits like educational programs to help members quit smoking or manage chronic conditions like diabetes. A focus on coordinated and preventive care often translates into a reduction in both premiums and out-of-pocket expenses.
3.Put a communication plan in place. Should your company decide to make the change to a narrow or tiered network, you can make the switch easier for employees by communicating clearly and frequently about how the change impacts them. “In my opinion, you can’t over-communicate,” said Ms. Janis, who recommends holding webinars, open forums and informational sessions during open enrollment as well as throughout the plan year. It’s also important to make contact information and updates easily accessible on your company’s website and employee portals. And of course, make sure that your human resources department is up to speed on the changes and ready to answer employees’ questions.
Contact us to learn more about narrow and tiered networks, and whether the switch is right for your company.
The Northwell Direct Network is provided by the Northwell Direct Administrative Services Organization, Inc. Wellness and clinical service offerings from Northwell Direct are provided by affiliated Northwell Health entities and their licensed providers. The Northwell Direct Network currently is available only to self-insured employers.