Thursday, April 24, 2014
HIGH DEDUCTIBLE PLANS & NARROW NETWORKS: NEW HEALTHCARE CHOICES FOR YOUR EMPLOYEES
Spring 2014 Business Law Bulletin
What is an employer to do in the face of severely rising healthcare insurance premiums? Despite the highly publicized governmental interventions in the healthcare insurance system through the Affordable Care Act (Obamacare), rising costs do not seem to be going away. Creative solutions to these rising costs are being tested by the Medicare and Medicaid programs, by some private insurers, and by some larger employers.
Some of these new and still experimental solutions are finding their way into Alabama. Up to this point, most health insurance plans in Alabama have been structured in the old fashioned way: the person covered by insurance pays a copay each time he or she visits a physician, or he or she pays a relatively small deductible amount for hospital visits. These structured and set payments are made regardless of what the provider that treats him or her charges the insurance company (or other patients) and without the patient having any clear knowledge of the actual price.
Obviously, the true cost of the healthcare is not apparent to the patient in these arrangements, so the patient has no financial reason to seek alternative medical care. The insurance company pays the provider, and, if the insurance company experiences losses, premiums for the insurance go up. Since the insurance has typically been provided as a fringe benefit through the patient’s employer, there has been little direct incentive for patients to change their “buying” habits regarding healthcare.
Many employers and insurance companies are now looking at moving away from health insurance that is based on the traditional copay model. One of the new approaches is the “high deductible” plan. In this kind of plan, the employee must first pay significant personal funds for healthcare before insurance payments begin.
Such plans often include a contribution by the employer to supplement the high deductible amount, but the goal of these plans is to cause employees to pay attention to the cost of their medical care. The plans provide coverage for catastrophic illness and lower negotiated fees for most services, but employees will notice the true cost of healthcare beyond the copays and lower deductibles of the past.
If these new plans cause employees to begin to choose healthcare based on cost, a second approach beginning to get some traction is based on the concept of “narrow networks.” A narrow network is a limited network of providers to which employees can go and pay significantly less money for services and treatment. This new economic model for healthcare means that employees, employers and insurers with whom they contract, will need to do their homework to determine which providers are best and most efficient. Providers who demonstrate lower costs will be worth considering, but outcomes, coverage by specialties, and past practices of employees may need to be considered as well.
The Centers for Medicare and Medicaid Services has been dealing with narrow networks as part of the insurance exchanges, and it generally requires that any insurance products offered on an exchange include in their narrow networks essential community providers, sufficient number and types of providers, and adequate coverage. Specific arrangements offered outside of the exchanges by private insurers and employers may not be subject to these requirements, but the concepts remain.
Given all this, human resource departments will find their already heavy burden of making healthcare insurance recommendations and decisions increasing dramatically. Smaller employers will likely face a myriad of proposals. Whether this leads to cost savings and improved care is still to be determined, but with the changes that are being made, it will be critical to stay informed and to be creative to retain employees and contain health costs.
Jim Pool is the Chair of the firm’s Health Care practice. He can be reached at 205-254-1050 or email@example.com.