Three Steps to Building a Better Health Plan Network  

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May 17 2018

In our 2017 National Survey of Employer –Sponsored Health Plans, we asked employers to rate the importance of strategies they will be using over the next five years to advance the triple aim of lower cost, higher quality, and a better member experience. This post on network strategies is part of a series that looks at these six key strategies.

In the challenging pursuit of health plan cost savings, network strategies are one of the most effective options. Savings of as much as 10-15% of PPO medical claims costs can be achieved-- but it will take effort and there will be trade-offs. Offering an alternative to your traditional PPO network to your employees inevitably will cause some level of change. If you're willing to take that on, here are three steps you should follow to evaluate the multitude of network opportunities available in the market.

  1. Size the opportunity. Consider the markets where you have the largest concentrations of employees. Start by knowing where your members are and what vendors and networks are available. New options are available, including those that focus on a select group of providers, tiering of providers based on quality and efficiency and networks where the PCP manages all referrals. Most employers still use a national strategy to select provider networks, but some are beginning to quilt together the best options by location and even using incentives to steer to these options.

  2. Know your numbers. Understand your costs and key metrics. Use your in/out- of-network utilization, center of excellence penetration, total cost of care trend, accountable care organization (ACO) attribution and other metrics to establish a baseline comparison to what is available in the market. Many employers don't know their level of ACO penetration and their associated costs (e.g., care coordination fees, provider incentive payments, etc.) as reporting on results is relatively new and varies considerably by carrier. It’s important to establish a strong baseline in this step so that you have a clear understanding of how alternatives compare to the status quo.
  3. Review the alternatives. Evaluate the financial opportunity offered by other vendors and networks to determine how savings are achieved -- plan design, deeper discounts, provider quality/efficiency, etc. In many cases, this involves sophisticated financial analysis. Ferret out the real ACOs from the imposters and understand the contract underpinnings of each network model. For each alternative, understand the financial, quality, member and administrative impact. 

Following these three steps will help you determine what’s to be gained from a new network strategy. Maybe it’s a question of working with your existing vendor to steer members to better providers within your current network. Maybe a bigger change will yield bigger benefits. Identifying the most effective network options for your organization is challenging work and can take many months to complete. Don't go it alone -- leverage the knowledge and expertise of your benefits advisors, carrier partners, and other third-party vendors to build the right network strategy for your goals and objectives. The benefits for your organization and your employees can be significant and long-lasting.

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