Narrow networks might have been born in the 90s, but they came of age in the last five years.
Recent surges in care costs, plus the effects of the Affordable Care Act, have made these plans more attractive to payers. By funneling patients toward a relatively small range of providers, narrow networks help insurers contain costs and improve outcomes.
And at the consumer level, at least, they're flourishing.
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In fact, on the individual marketplace, narrow networks are more than emergent — they're dominant. A study from McKinsey found that fully 53 percent of payer networks are narrow, up from 48 percent in 2014. Further, among all patients who qualified for care in the individual marketplace, 29 percent had only narrow network plans to choose from.
Employer-based plans, however, have been slower to adopt narrow networks. Why?
Not ready to make the leap
Only 7 percent of self-insured employers offer narrow networks to their employees. They're rare, in part, because they're so new. Narrow networks haven't been on the scene very long. This makes employers skeptical about long-term savings. There's not yet enough economic data to prove these networks can keep costs down in the long run.
Narrow networks also have a PR problem. Many patients believe that payers create narrow networks exclusively for price discounts. They feel put-off when they're told to see 'bargain doctors', who they believe may not perform as well as they expect.
Misguided as that impression may be, it still gives employers pause. They don't want to antagonize their workers, or make their benefits package look less attractive.
A network with potential
However, interest in a particular type of narrow network has emerged among large employers. 38 percent of the biggest (5000+ employee) firms operate what are known as high-performance networks.
These are a type of narrow network where the primary objective is controlling for outcomes, rather than costs. Payers will incentivize employees to visit high-performing, high-value providers — thereby encouraging better health in employees, and a stronger return on their healthcare investment.
It's an appealing idea. By steering employees to excellent providers, employers can enjoy the best of both worlds. They will still be able to negotiate bundled pricing on high-volume procedures, while simultaneously offering an attractive health package to employees. In the case of surgeries, further savings will come from reduced rates of complications and adverse outcomes.
More and more employers of all sizes are examining this model to see if it could work for them.
But the tricky part is implementation. Employers must carefully balance narrowness and access. If a network doesn't have enough providers — or not enough providers of a specific specialty — then it's possible that some patients will not have adequate access to care. Obviously a significant problem, when the goal is pursuing positive outcomes.
Four steps to high-performance
High-performance networks are promising. To ensure that they work, employers should follow four steps:
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Employers should be completely transparent about how they construct their networks.
Engaging a highly-qualified, independent analytics firm — with no conflict of interest in rating providers — is a good place to start. That will go a long way toward earning employee trust. After finding such a firm, employers should then disclose the criteria they use to evaluate providers, and make clear why certain hospitals and doctors made the cut, while others did not.
This will help employees understand the value of constructing narrow networks, and demonstrate how the employer is looking out for employees' best interests.
Employers need to aggressively combat the misconceptions surrounding narrow networks.
They need to educate their employees about how these networks work. They also need to clear up any confusion surrounding an employee's options for care.
Eventually, with the right messaging and multi-channel storytelling, patients will come around. They'll understand that their employers aren't just bargain-hunting.
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Patient access must be protected.
This requires carefully examining the patient population, and ensuring that the high-performing network is sufficiently broad to cover their care needs. This is especially important for employers with employees in rural areas, where provider networks might be a little spotty. They need to ensure that no employee will have to travel unreasonably far, or wait unreasonably long, for their care.
Finally, employers need to ensure that the high-performers in their network are, in fact, high-performers. The only way to do this is to use objective outcomes data, adjust it for risk, and compare providers against each other. Without this kind of data-driven decision making, it's impossible to construct genuinely high-performing networks of providers.
High-performing networks have the potential to reap immense rewards. Firms can save a lot of money, and employees can enjoy much better outcomes. But these networks must be carefully deployed. As in much of the healthcare arena, the first step is a dispassionate look at the data.
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