Narrow Networks can be called many names: Skinny Network, High Performance Network, Choice Network, Select Network or Tiered Network. All of these networks are designed with fewer providers with the goal to lower the price of healthcare. The reduction in provider choice is between 40% to 70% less when compared to the insurance companies largest traditional PPO network offering. The range of savings is between 5% to 15%. These networks are specific to their metropolitan area, thus posing challenges for multi-location employers.
The simplest Narrow Network is built like its older sibling, the traditional PPO. This structure uses the fee for service reimbursement method utilizing fewer physicians and facilities with the promise they will receive more patients, and, thus, they need to accept a lower pricing schedule from the health plan. Typically, teaching hospitals and the costliest facilities are excluded. This structure allows health plans to offer members an out-of-network benefit which can result in more members being willing to enroll. The additional savings under this model vary but can be up to 5% versus the traditional PPO.
High Performance Networks are structured under an ACO (Accountable Care Organization) or Total Cost of Care reimbursement model. This method is usually developed with a large hospital and physician system and excludes the system’s top competitors. The system may receive a larger payment for actual services compared to the traditional fee for service model, however, the total cost of the patient’s care would be less when rehabilitation, physical therapy, and lack of complications are factored into the cost to the health plan. This model typically has some type of bonus for the provider system if they achieve a total cost of care target established by the insurance company. This model does not allow for an out-of-network benefit for the enrolled members. This model offers the greatest savings of around 15% yet has the lowest adoption rate by employers and their employees based on the restrictive size and lack of out-of-network benefits.
Tiered Networks are the newest offering to enter the marketplace. Under this model, the health plan offers a higher benefit level to the highest performing providers, middle benefit level for the remaining network providers, and a non-network benefit level to all other physicians. This model is built off the traditional PPO chassis and does not require the employee to decide on a smaller network at open enrollment. Rather, employees are rewarded for choosing a high performing provider in order to receive richer benefits. The challenge under this model is educating the members on 3 benefit levels. It is too early to tell if this design is generating savings to the health plan.
Other than the health insurance exchange where these are the only networks offered, the adoption of Narrow Networks by employers has been minimal. Even when employers offer the limited networks as an option to their employees, there is low enrollment by the employees due to lack of education, complacency, or fear that they will need a facility not in the network if their health status changes. Sponsors of health plans should perform a specific evaluation of their provider utilization every 12 to 24 months in order to see if this can provide some savings to the benefit budget. Narrow Networks (by any name) can be a vital part of an employer’s benefit strategy, but it is not the silver bullet the market place is longing for.