Branded Narrow Networks: Gold Value at Bronze Prices

Branded Narrow NetworksSummary
  • Less satisfied consumers are adjusting to narrow networks.
  • Consumers are buying on price and need help finding providers.
  • Insurer, provider joint branding is opening consumer mental shortcuts to providers.
  • Healthcare transformation is driving insurer, provider collaboration to deliver gold value at bronze prices.
  • Insurers, providers are creating new joint branding collaborations for 2016.
  • Consumers ultimately will choose providers allied with insurers in consumer-friendly narrow networks.

On the way to consumer-driven health care, consumers have confounded the reformers, leaving an amazed Uwe Reinhardt in their wake.

Americans, he wrote last week, “seem so obsessed over their freedom to choose their own health insurance carrier and policy” that they will give up freely choosing their doctor or hospital. There is no accounting for taste, marveled Reinhardt as he quoted “Julius Caesar or Voltaire or Yogi Berra or whoever.”

Consumers Adjusting to Narrow Networks

To be sure, consumers are adjusting to the narrower provider networks of the bronze and silver exchange plans.  Even with subsidies, enrollment in these lower-cost plans on the public marketplace grew from 85% to 89% over the past year.  Among all enrollees, 87% qualified for a premium subsidy.

Although not as satisfied, only 17% of bronze and silver enrollees have switched to broad-network gold and platinum plans, according to McKinsey.  Meanwhile, 13% switched from broad to narrow plans.  This occurred in an active shopping environment; more than half of all re-enrollees who shopped for coverage changed plans.

Consumers Buying on Price, Need Help Finding Providers

For unsubsidized consumers, price has also been a significant driver.  In fact, bronze plans were more popular on the private eHealth insurance exchange, with 46% opting for the lowest-cost level, while only 22% did so on the public marketplace.   Most popular on the public marketplace was the silver level at 67%, while silver accounted for 23% of eHealth enrollees.

Consumers have not completely forsaken their providers; many simply gave up trying to find them, defaulting to price as the most easily accessible decision shortcut.  This year, 44% of bronze or silver public marketplace enrollees were unaware of their network choices, according to McKinsey.

When the National Health Council surveyed during open enrollment last fall, 36% said it was hard to find a list of providers and only 24% said such a list was easy to access.  Despite the barriers, nearly all (79%) tried to find their providers.  All but a handful asked for standardized provider lists and provider search tools.

More lists and tools can be useful, but they will not be enough.  Consumers still must navigate complex information…and lots of it.  More than detailed roadmaps, consumers need mental shortcuts to providers equal to the role price plays as a shortcut for plan selection.

Joint Branding Opening Consumer Mental Shortcuts to Providers

The most powerful consumer shortcut is a decision-enabling brand, and it is through joint branding that consumers will ultimately integrate price and provider choice in selecting a health plan.  Take the husband and wife owners of a small Chicago family business.  They signed up for a lower-cost plan from Land of Lincoln Health featuring one of its preferred-partners, Swedish Covenant Hospital, as reported by the New York Times’ Reed Abelson.

They are not alone:

  • Aspirus, a Wausau, Wisconsin, health system, and Arise Health Plan have launched a the Aspirus Arise plan called with Arise Health Plan targeted at individuals and businesses employing less than 50 people.
  • Aetna and Inova Health System Foundation have created Innovation Health to serve Virginia with a “collaborative model.”
  • DaVita Health Partners and Independence Blue Cross and Blue Shield have established Tandigm Health, a Philadelphia-based primary care offering.
  • Health First Health Plans and Florida Hospital Healthcare System have set up a commercial health plan in Central Florida called Florida Hospital Care Advantage.
  • Harvard Pilgrim Health Care and New Hampshire’s Dartmouth-Hitchcock and Elliott Health System formed ElevateHealth, a non-profit joint venture, which has lowered costs by 20%.
  • In upstate New York, Excellus BlueCross BlueShield and Bassett Healthcare Network teamed up to offer Bassett Select Silver and Bassett Select Gold health plans.

Variations include Vivity, an HMO-style joint venture formed by Anthem and seven Los Angeles hospitals, including the prestigious Cedars-Sinai Medical Center.   In Minnesota, Medica is offering a narrow network plan including the Mayo Clinic, Mayo’s affiliate hospitals, Northfield Hospital and Winona Health.  However, Medica is the sole owner of the plan.  Meanwhile, Mayo and UnitedHealth Group are pooling data in a joint venture called Optum Labs.  In Phoenix, Cigna has teamed with Banner Health and Scottsdale Lincoln Health Network to offer a narrow network plan exclusively in Maricopa County.

Accountable care organizations (ACO) have been an especially popular vehicle for early collaborative efforts between insurers and providers.  Beginning in 2008, Cigna has been a leader in this space.  It now has Cigna Collaborative Care arrangements with 122 physician groups, such as the Medical Clinic in North Texas, which serves the Dallas/Fort Worth region.  Meanwhile, the Memorial Herman Accountable Care Network in Houston has teamed up with Aetna’s ACO initiative, called Aetna Whole Health.

Will all this collaboration ultimately lead to consolidation of insurers and providers?  If Pittsburgh provides any lesson, I doubt it.  There, UPMC offers an insurance plan and the insurer Highmark has acquired Allegheny Health Network.   Battles between the two over reciprocal network access have been fierce.  Elsewhere, providers entering the insurance market have found themselves excluded from other insurers’ networks.  Others have found challenges with venturing outside their core competencies or have absorbed losses for years before turning a profit.

Healthcare Transformation Driving Collaboration to Deliver Gold Value at Bronze Prices

Still, short of consolidation, considerable incentives are driving greater collaboration between insurers and providers, particularly through co-developing and -branding narrow networks.  The incentives begin with the fundamental shift from fee-for-service to value- and outcomes-based reimbursement, the pace of which is accelerating.

Inevitably, providers will have to assume risk associated with achieving defined outcomes, leading to more sophisticated cost control, greater care coordination, management of health on a population level and the creation of integrated delivery networks.  To succeed, they need the access to insurers data,  risk management and loss control competencies; joint ventures or other collaborative vehicles provide that access.

Conversely, insurers need differentiation, given PPACA benefit design limitations that have made cost the primary differentiator.  Exclusive and/or creative relationships with respected provider brands can provide valuable differentiation, especially if delivered at a lower cost.

In fact, McKinsey found that the 63 co-branded plans offered on the public marketplace had lower prices than the 73 plans where providers served as insurer as well as provider.  Co-branded plans were also more likely to have lower prices than insurer-led plans.

Meanwhile, in the group market, insurers need to keep pace with their employer customers.  Big employers like General Electric are contracting directly with centers of excellence for joint replacements, some cancer care, organ transplants and bariatric surgery.  Only four institutions received GE joint replacement contracts for joint replacements.  Another four institutions, assembled by the Pacific Business Group on Health in the Employers Centers of Excellence Network, provide joint replacements for Walmart, Lowes and McKesson employees.

A recent Towers Watson survey found that employer use of centers of excellence (either within health plans or via a separate network) and narrow networks will triple over the next three years.  The survey also found that a quarter of employers have actively considered private exchanges and more than a third consider them a viable alternative by 2018.

Insurers, Providers Creating More, New Collaborations for 2016

Across the nation, insurers and providers are deep into creating new collaborations for the upcoming 2016 open enrollment season.  Last month, Tufts Health Plan and the Granite Healthcare Network encompassing five New Hampshire not for profit systems announced a new joint venture.   Cigna has told shareholders it is “now forming (delivery system) alliances with hospitals and hospital systems that will provide access to quality, value-based care in local communities.

Especially busy will be the teams at San Francisco’s UCSF Medical Center and John Muir Health, which just finalized their agreement to create the Bay Area Accountable Care Network.  They intend to offer insurance products through the new company, but with established health plans. UCSF Medical Center CEO Mark Laret explained to Modern Healthcare:

“We intend to partner with Anthem Blue Cross or other insurers. This isn’t just us putting together a narrow network and putting that on the list of narrow networks with the other products the health plans might offer. We want to come together as true partners where we are taking both upside and downside financial risk for the health of the population and the financial performance of the network.”

Other insurers had better be scrambling, if not in San Francisco, then throughout the nation, to line up collaboration partners among the nation’s leading provider systems.  Fast approaching are open enrollment periods when consumers will choose providers allied with insurers in consumer-friendly narrow networks.

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