Health insurance is probably the most important element of any employee benefit plan. The most popular types of plans are HMO (health maintenance organization), PPO (preferred provider organization) and POS (point of service). These plans all depend on predefined networks of doctors and hospitals (providers) that patients can visit to receive service. When you decide on a plan, you must balance the cost with the needs of your employees. You may be looking for new ways to manage your spending, such as re-evaluating the portion of premiums that you pay for employees or switching to a higher-deductible plan. You may also consider changing to a plan with a narrower network of providers.
A New York Times article refers to an analysis from the consulting firm McKinsey & Company which defines a narrow network as one that includes fewer than 70 percent of the doctors and hospitals in a given metropolitan area. Insurance companies negotiate rates with providers who are within their specified network. Many doctors are willing to provide lower rates based on the expectation that they will see a higher volume of patients. Providers who won’t meet the insurance-company prices are removed or simply not included in the network. This strategy of allowing only providers who are willing to provide services at lower rates can lower premiums by 5 to 20 percent — a savings for your employees and for you.
Considerations for a Narrow Network Plan
By switching to a plan with a narrow network, you can decrease costs while still staying compliant with the ACA mandates. You can use the money you save to invest in your business or to fund additional benefits, such as dental or vision insurance. Remember that a solid benefits plan is a key way to attract and retain talent.
Narrow networks provide fewer options of in-network providers, but there are typically still plenty of physicians, specialists and hospitals to choose from. If you are concerned that your employees may want to stay with doctors who are out of network, consider a PPO or POS that allows employees to see out-of-network physicians at a higher cost to the employee. This is a useful way to keep your costs down while allowing the employees freedom of choice.
Tools and Education
There are tools to help you evaluate the scope of in-network physicians that are in your geographic region. Call the provider you are considering, or use the insurance company’s provider-search tool. Check various types of doctors and medical facilities based near where your employees live to get a general view of the number of available physicians within certain networks. Educate employees about this tool and how to use it to ensure that they are visiting a physician within the network to help them keep their out of pocket costs down.
Most employees are acutely aware of the increasing costs of services and how they affect the cost of health care in general. Choosing a narrow-network benefit plan doesn’t have to mean inconvenience or limited care. With some education and guidance, your employees will learn to make the most of their available options.
Mary Parsons is retired from a 30-year career in the insurance industry. She worked in the claims department of a major insurance carrier as a claims adjuster, manager and a member of a catastrophe team. Since her retirement, she has developed a career as a freelance writer. As an insurance professional, she has been a contributor to several insurance websites.