By Rob DiMase, Vice President, Sentinel Benefits & Financial Group

If it hasn’t happened already it’s quite likely your employer will soon be offering either a limited or tiered network health insurance product.

Limited networks are not a new concept, they’ve been around since the advent of the HMO plan.  Unlike many health plans, a limited network product allows access to a defined smaller network of providers located within a certain geographic region.

The latest entrant into the limited network game is Steward Health Care with their Steward Community Choice product.  Likely on deck are BMC Healthnet and Neighborhood Health after their acquisition by Partners Healthcare.  These limited networks plans make the promise of significant premium savings in return for a limited choice of providers.  I personally question the Health Systems desire to create products for the employer marketplace – see Jackson Health System’s challenges in this area[1], but that is a topic for another day…

The real question for employers and employees is will they work?  Employees have enjoyed nearly unfettered access to health care providers with no consideration to the actual cost of care being utilized.  Health care reform legislation in Massachusetts and on a National level has reaffirmed the concept of unlimited access.  However, since the 2008 recession most employers have been laser focused on cost.  Often the two collide, it’s hard to maintain unfettered access and maintain low cost.

The disparity in costs was further highlighted by the Massachusetts Attorney General’s Office preliminary report on January 29, 2010 and her conclusion that hospital and physician group prices vary significantly within the same geographic area and amongst providers offering similar levels of service.  Her findings further indicate that the price variations were not correlated to quality of care but based mostly on market leverage, i.e. the provider’s ability to negotiate a more favorable reimbursement rate from the carriers.

The framework of the tiered network product is a direct response to this phenomenon.  In a tiered network your cost as a consumer is directly related to the actual cost of the services you utilize.  Basically the way the rest of the economy works.  The main overriding issue is that as a health care consumer you often don’t find out the cost of the services utilized until after you’ve used them.  Add the fact that many of us are in a weakened emotional state or not thinking rationally when a medical issue overcomes us. Who wants to “price shop” at that point?

This article was provided by Sentinel Benefits and Financial Group, a silver sponsor of the CFO RoundTable. For more information, please visit their website at www.sentinelgroup.com.