Narrow networks have been in the news for the last few years. A number of carriers have started to offer this to employer-sponsored health plans as well as to individual marketplace. This concept is marketed differently than what it really is.

Narrow network is essentially a higher discounting method based on an assumption that a provider will offer more concessions when their competitors are excluded from the network. The higher discount is supposed to bring down the overall cost of the care for self-funded employers. Typically layered in tiers, narrow network becomes Tier 1 and broad PPO network is offered at a higher cost.

This is no more than a short term fix because it does not address the basic problem of accountability. By becoming part of a narrow network, a health system is not declaring that they will be accountable for the care they provide to your employees, that they will report on the outcomes that are important to you, that they will align their payments to meeting your quality measures or they will provide more visibility and better experience to your employees and their families. None of that. All they are promising is a better discount. Given the lack of transparency and huge variability in healthcare costs today, that does not mean much.

Even if the agreement between the carrier and network is value-based, employer don’t gain much from that. If the provider delivers on the promise of reducing costs in a risk-reward model, provider and carrier split the savings, employers not so much. If that does not happen, providers don’t make more in incentives, but the employers still pay for the higher costs.

In other words – Heads I win, tails you lose.

This approach will work only if the employers themselves are part of the equation, have full control over what benefits they require from the ‘narrow network’, what outcomes are important for them and what contractual arrangements will make sense to get value for the care.

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