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Tiered health insurance plans can offer new solutions in cost and value

published by: selicia chronister date: April 6, 2017

Media across the country are covering the changing world of health insurance at all times, from the controversy over the Affordable Care Act to providers’ innovative strategies for managing health across the population. Regardless of how the market changes, one principle remains unchanged: Any businessperson offering employer-sponsored health insurance wants their population to have access to high-quality providers that won’t break the bank.

Reading: What does tier mean in health insurance

The desire to contain health care costs has been a goal for decades, leading insurance companies to offer different payment arrangements. In the 1990s, for example, providers were paid a fixed annual or monthly lump sum per patient through what was called a health maintenance organization (HMO). because this deal involved prior authorization and limited options, its popularity waned. Today, insurance companies and providers are working together to create insurance products that combine cost savings for the consumer, freedom of choice and, in many cases, provider quality.

what is tiered insurance?

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Tiering is a way for insurance companies to manage what they pay for health care services and allows patients to include the cost of care as a consideration when choosing a doctor or health network.

Providers in tiered plans are generally classified as “in-network” if they have contracted with the insurance company and may have agreed to financial discounts for services rendered. They may also have agreed to certain quality metrics, including a pay-for-performance program. Depending on the plan design of the insurance product, there may be multiple tiers of providers included under the “in-network” umbrella. Generally, the first tier of in-network providers includes lower out-of-pocket costs for the consumer.

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the goal? Tiered insurance plans provide patients with quality and financial incentives to visit a hospital or physician that has been placed in a preferred tier. Members may also choose to receive care from providers that are on a secondary or “out-of-network” level. By making this choice, members generally have higher out-of-pocket costs and may receive care that is not subject to agreed-upon quality measures.

out-of-pocket expenses

Illustration is the best way to convey options for members participating in a tiered insurance product. Below is an example of a tiered preferred provider organization (ppo) network and its cost tiers for patients:

In-Network Tier 1: In-network providers that meet the terms of the insurance company’s contract for cost and quality. lower out-of-pocket cost.

Tier 2: In-network providers that may not meet the terms of the insurance company’s contract for cost and quality. higher out-of-pocket expense.

out-of-network providers not included in the ppo network. higher out-of-pocket cost.

experience of members and employers

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Today’s tiered network plan designs intersect with the needs of both employers and members. Employers reap the cost savings of their employees getting care from top-tier in-network providers. Employee plan members benefit from a high-quality, interconnected health system that offers insurer-provider care coordination, collaborative management of diagnosed conditions, closing gaps in care, and convenience through centralized services and possible cost containment. there is also freedom of choice: members retain the ability to make individual decisions about where care is given and the implications of those choices.

Tiered network plan designs may not be the latest innovation in a changing industry. for today, it is a valuable solution for aligning employers, members, providers, and insurance companies for cost and quality management across populations.

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To learn more about tiered network health plans and the options available to your organization, please contact us.

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