Provider Networks – What You Need to Know at Renewal

Originally Published in RMP Advisor, November 2009

by Bob McMackin

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It’s not just about cost. For many business owners, the Thanksgiving season is more than just a time to watch football and enjoy a turkey dinner with family and friends. It’s also a time when many of you are making final decisions on the health insurance plans you will be offering to your employees. Countless buying decisions are mistakenly made solely on the basis of cost and benefit design. Ignoring the insurance company’s hospital and physician network can adversely affect the quality of care and the cost for that care for your employees. Not all provider networks are the same.

Access to the right physicians and hospitals is critical. Once prospective buyers think they’ve found the medical insurance plan that is right for themselves and their employees, they also need to take a look at the network. Most insurance carrier Web sites have a link that allows you to search the network directory. Prior to finalizing your decision, allow employees to make sure their primary care physician is in the network, as well as any specialists that they or their family members see on a regular basis. Some plans—such as health maintenance organizations (HMOs)—require your employees to select a primary care physician from their network to act as a gatekeeper to other levels of care. Employees will also want to look at which hospitals are in the network near where they live. Except for very rural areas, there should be a network hospital within 10 miles of both home and work locations.

Access is not the only thing to look for in a network. While 2 insurance companies may have networks in your area with all of the same hospitals and most of the same doctors, the level of discount negotiated by each company with those providers may be very different. In some cases, the difference can be 30% or more. This difference can impact your employee’s out-of-pocket costs.

• Example 1. An employee living in Delaware County purchased family health insurance with a $2,500 deductible. The parents take their daughter with a sprained knee to the family doctor. After examining her, the doctor bills the insurance company an office charge of $110. Since the deductible has not yet been satisfied, your employee is responsible to pay this office charge less the agreed upon physician discount. Company A negotiated a discount of 70%, while Company B’s discount is only 45%. So the family pays $33 (based on a 70% discount) if their health coverage is with Company A, or $60 if the plan you’re offering them is from Company B. This represents a savings of $27.
• Example 2. Suppose after this initial examination, the doctor says the employee’s daughter from Example 1 has ligament damage and will need surgery. Following the procedure, the surgeon bills your insurance company $1,500. Assuming the same discount levels as Example 1, the difference in your out-of-pocket costs would be an additional $375.

What you should do at your next health insurance renewal. When deciding which health insurance carrier and plan is best for your employees, make sure your broker is talking to you about more then just rates and plan design. A strong network, plus offering access to the best healthcare providers at deep discounts, will result in healthier, happier employees.

Bob McMackin is a Senior Benefits Advisor at Risk Management Partners, LLC, with over 21 years of experience in building employee benefits and health insurance programs for companies across numerous industries in the Delaware Valley. Contact Bob or any of our other expert consultants online at http://www.rmpllc.biz/contact or by phone at 610-975-4415.