Network strategies to optimize patient care and save
The steeper rise of the health benefit cost trend has employer plan sponsors worried. After a decade of cost increases averaging about 3%, the average per-employee cost of employer-sponsored health insurance rose by 5.2% in 2023 to nearly $16,000 and employers expect a similar increase in 2024. The longer view is also cloudy – CMS projects national health expenditures to increase by an average of 5.4% annually through 2031. The cost management strategies that have helped slow cost growth in the past may not be enough in this challenging new environment.
Where to find a new source of savings? We suggest taking a closer look at where plan members get care. Medical claims typically account for three-quarters of health plan cost, and where patients choose to seek care can make a big difference in the quality and cost of care received. The medical provider network, in combination with plan member support resources, plays a crucial role in determining where care is ultimately delivered.
Today, most large employers utilize a broad open-access network due to the value consumers place on choice. Patients have the freedom to choose where to seek care without a referral, and they can often go either in-network or out-of-network, albeit with lower benefits for out-of-network care. However, a shift has begun. Faced with rising costs and the need to keep care affordable for employees, employers are increasingly willing to consider strategies that steer patients to higher-performing providers – even strategies that restrict choice. Let’s look at some of the key network levers that are available today, which can be implemented separately or in conjunction with each other.
Carrier-based Exclusive Provider Organization networks. A growing number of large employers are transitioning to exclusive provider organization (EPO) networks. An EPO still provides choice of provider within the network, without referral requirements, but eliminates out-of-network (OON) coverage, except for emergencies. Eliminating OON typically can save an employer up to a couple percent in claims. In 2023, 12% of all large employers – and 25% of those with 20,000 or more employees – offered an EPO.
Carrier or vendor-based curated high-performance networks. In recent years, the healthcare market has introduced a number of curated high-performance networks (HPNs) with the potential to generate double-digit savings compared to typical broad open-access networks. They are designed to identify higher-performing providers in terms of quality and cost and focus on directing care to those providers. The redirection of care can be achieved through various means, such as tiering of in-network providers, specialist referral requirements, and excluding certain providers from the network.
Centers of excellence. Many employers already provide plan members with access to one or more centers of excellence (COE), either as a supplemental offering or as a carve-out, meaning the COE is a member’s only option to receive a specific covered service (for example, bariatric surgery). The range of services provided by COEs is expanding; more recent offerings include cancer treatment and women’s reproductive health. COEs can result in better outcomes and savings through avoidance of surgery or more appropriate care, lower readmission and complication rates, earlier return to work, and more.
Improved access to better-performing primary care physicians. It is important to also consider how patients navigate their health care options and choose where to seek care. How can a plan help guide patients towards high-quality, affordable care? One approach is a benefit plan design that incentivizes access to quality primary care physicians and virtual care. Note that maximum return from investments from expanding primary care is yielded from “rising risk” and “higher risk” plan members as it is pivotal to manage their downstream care and outcomes. Employers investing in preventive care tend to see improvement in the short term in avoidable urgent or emergent care utilization and disease progression.
A key selling point for EPO and HPN network options is affordability, as typically they do not increase cost for plan members and often offer lower paycheck deductions and/or out-of-pocket costs relative to other plans. That may be one reason why so many employers, especially those at bigger organizations, say they will be pursuing strategies like HPNs and COEs that steer employees to higher value care over the next few years (46% of employers with 5,000 or more employees and 59% of those with 20,000 or more). As mentioned, these solutions can result in significant savings for both the employer and plan members; the trade-off is that they do cause member disruption. But given the alternatives, this seems to be a trade-off that more employers are willing to make.
How to get started
The array of network options available to employers continues to evolve, as do the resources available to help members navigate the healthcare system. To find the right approach for your organization, consider starting small. Pilots are often a good way to test a strategy and a partner. Do you have a location where your population might benefit from a lower-cost health plan? Or where healthcare quality has been a concern? It might make sense to pick a location where a new strategy could help address an existing problem. Then consider and compare the options available. What would the impact be on member access to primary care, specialty care and hospitals? How would a new network compare in terms of where members currently get care? What is the projected impact on claims and administrative cost for each option, and how big a “lift” would be required to implement it?
But don’t be afraid to cause some meaningful disruption. Given the current and future cost picture, now is a great time to get familiar with network options that align with your employee population and meet your strategic and financial priorities.
This post is one in a series of Seven breakthrough benefit strategies to explore this year.