Employers seeking to control health-insurance premiums (and that’s just about all of them) have a new tool at their disposal as they negotiate plan renewals for 2011.
The health cost control law signed by Governor Deval Patrick in August requires Massachusetts health plans to offer at least one limited or tiered network product that is at least 12 percent less expensive than a comparable full-network offering. That means employers and their workers can reduce costs and preserve benefits by doing business with community hospitals and other facilities that deliver verifiably cost-effective health care.
The requirement takes effect on January 1.
Health plans are still awaiting final regulations on limited network products from the Massachusetts Division of Insurance. But several carriers already have such plans on the market and others have them well along on the drawing board, so it’s a good time to begin the conversation with your health-plan representative.
“Limited networks give employers the opportunity to control health care expenses that have in some cases been rising as much as 20 percent to 40 percent per year,” said Richard C. Lord, President and Chief Executive Officer of AIM.
“These networks also allow both employers and their workers to find excellent medical care, not just expensive medical care.”
The limited network provision was part of a cost-control bill intended to provide relief to rate-shocked employers while policymakers, health care providers and business representatives hammer out long-term solutions to the problem. The law also limits the ability of subscribers to jump on and off health plans repeatedly; prohibits anti-competitive contracts between providers and insurers; and establishes a pilot program on bundled payments, creating building blocks on the way to payment reform.
The idea behind limited networks is simple – find quality medical care at reasonable prices. That means avoiding high-cost providers for procedures that can be performed just as well in lower-cost, community settings.
Limited networks are particularly promising for Massachusetts because of the gaping rate disparity among doctors and hospitals within commonwealth. The attorney general's office issued a report this year concluding that the primary driver of health costs is the variation in rates that certain hospitals and physician groups are able to charge relative to their peers. The report states:
"Price variations are not correlated to (1) quality of care, (2) the sickness or complexity of the populations being served, (3) the extent to which a provider is responsible for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or medical facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities . . . Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers."
Pat Hughes, President and CEO of Fallon Community Health Plan in Worcester, wrote recently in the Boston Business Journal that the key for employers is to find the right limited network. Hughes said employers should look for a few important ingredients:
- A full spectrum of providers, including acute care hospitals, primary care physicians, specialists and other services;
- Multispecialty group practices that use electronic medical records;
- Community hospitals that have demonstrated through objective clinical data the capacity to deliver high-quality care and good outcomes at reasonable costs;
- A mechanism that allows patients to visit a doctor or hospital outside the network for a second opinion or a procedure that is not available within the network.
Employers must become part of the solution to rising health care costs by taking proactive steps like purchasing a limited/tiered network product. As the purchasers of health insurance, they hold huge potential to change the marketplace and need to start flexing a little muscle.