Employers: Don’t Be Narrow-minded
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:
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- What providers are in the network?
- What’s the quality and safety record of the providers in the network?
- How much are we saving by limiting choice?
- By limiting choice, are we sacrificing quality and safety performance?
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.
So far, the Patient Protection and Affordable Care Act has had no effect on the availability of employer-sponsored health insurance. That’s not me talking; nor is it someone from the Obama administration. It’s the conclusion of researchers who analyzed data from something called the Health Reform Monitoring Survey (urbn.is/1lfB0g1). The survey, which is administered by the Urban Institute’s Health Policy Center, queried about 7,500 working nonelderly adults ages 18 to 64 about where they got their health coverage. The survey compared their answers from June 2013—seven months before health coverage was available through state health insurance exchanges—and from September 2014—nine months after the exchanges opened for business. The prediction by ACA critics, by employer groups opposed to the ACA, and by consumer and worker organizations critical of employers was that companies would drop their health insurance plans and force employees to buy benefits from the exchanges. Well, that didn’t happen. According to the researchers: 82.2 percent of employers offered health benefits in September 2014, compared with 82.7 percent in June 2013; and 71.4 percent of employees were covered by employer-sponsored health benefits in September 2014, compared with 71.2 percent in June 2013 (bit.ly/177J6qZ).
In the November column, I talked about the benefits to employers of the growing field of telemedicine, which allows workers to have virtual office visits with their doctors via computer and other electronic connections (bit.ly/1rKQhyy). We recommended that employers offer telemedicine as a covered benefit to employees as part of their health insurance coverage. As we noted, Minnesota does not require private health insurers to cover telemedicine services. That means local employers would either have to find a carrier that does or pay directly for it out of pocket (or their employees’ pockets). But that doesn’t mean Minnesota is hostile to telemedicine. In fact, two new reports—both from the American Telemedicine Association—give the state good grades in making this cost-effective treatment option available to patients. In the first report, the ATA gave Minnesota a B for its coverage and reimbursement climate for telemedicine (bit.ly/1okh39x). In the second report, the ATA gave the state an A for a physician practice standards and licensure environment that allows telemedicine to be performed by doctors (bit.ly/1okh8u6). What this means for Minnesota employers is this: It’s time to take advantage of telemedicine. Your employees will like it, and you’ll like the positive impact it will have on workforce productivity and your health benefits costs.
David Burda (@davidrburda, firstname.lastname@example.org) 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.