If you stopped by my house, I could give you a guided tour of all the things I bought based solely on price. Most of them are sitting in the garage (a propane-fueled mosquito killer), tucked away in a tool cabinet (an easy-to-use universal adjustable wrench) or resting on a shelf (a one-step, non-stick quesadilla maker). They’re all gathering dust because they never worked as promised.
Employers should think of these experiences when they consider contracting with a health insurance carrier that’s offering them a “narrow network” in exchange for favorable health insurance premiums for them and their employees.
The concept is easy for businesses to understand because narrow networks work on a basic business principle: high volume in exchange for lower prices. Despite the health care industry’s volcanic rhetoric about moving from volume to value, narrow networks are all about the volume.
Here’s how it works: A private health insurance carrier enters a business arrangement with a specific health care provider or network of providers. The carrier then sells access to that group of providers to employers for a discounted price. Employers pay lower premiums for the “narrow network” plan, and the contracting providers accept lower payments from the carrier in exchange for the volume of patients they get from employers. Employers do their part in this economic formula by limiting their workers’ choice of providers to network hospitals and doctors. The carrier gets its cut in the middle.
Unfortunately, more employers are buying into the narrow network concept, despite the fact that those who’ve done it already say it hasn’t done much to lower their health insurance costs.
A survey of nearly 600 employers by the National Business Group on Health found that 18 percent offered narrow networks to their employees in 2014 and another 20 percent were planning to do so this year (bit.ly/1e9IC0c). A separate survey of more than 2,000 employers by the Kaiser Family Foundation and the Health Research and Educational Trust found that access to a narrow-network health insurance plan varied significantly by employer size—from a low of 7 percent for employers with 200 to 999 workers to a high of 15 percent for employers with 5,000 or more workers (bit.ly/1xJmo46).
But a cheaper price doesn’t always produce the desired result. Sixty-two percent of the employers in the KFF/HRET survey said narrow networks were “not too effective” or “not at all effective” in containing their health insurance costs, with only 6 percent touting narrow networks at being “very effective” in achieving the desired result. Ouch.
As employers gather information on the results of their health plan options this year and begin to consider their options for 2016, they must ask themselves the following questions when tempted by a narrow network plan:
Most employers and their workers will jump at the chance to pay less for great care from a limited choice of hospitals and doctors. Smart companies can make that happen.
David Burda (@davidrburda, email@example.com) is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert.