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eVitality January 2011
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care costs
Tiered Health Plan Networks

Photo of stethoscopeAs medical care costs continue to rise—taking policy premiums with them—health insurance companies have been searching for solutions that would let consumers share the mounting expense.

One answer: tiered provider networks, which offer financial incentives for plan members to use the services of hospitals and doctors that cost less. Understanding how these plans work can help you make informed decisions about your options under this insurance model.

The details may differ for every insurer that offers a tiered plan. For the most part, such plans sort their care providers into tiers based on quality of care, cost, or a combination of both. Plan members are then offered financial incentives—in the form of lower copayments or premiums—to pick providers from the lower-priced tier.

For example, patients who choose a lower-tier hospital for an operation might have to pay $50 per day for care. Patients who choose the highest tier might be charged $200 a day.

Other insurers address the concept by paying 80 to 90 percent of the bills incurred at a low-cost hospital, but only 60 to 70 percent of those billed by a more expensive, higher-tier hospital.

Many health maintenance organization plans cover care only when patients choose in-network providers. In contrast, tiered networks allow insurers to include all or most hospitals and doctors in their plan, albeit at differing price points. This gives their members a wider choice of providers, reducing dissatisfaction among employees and employers.

A Similar Model
Plans offering tiered networks for hospital and doctor services are relatively new. Still, consumers who have experience with preferred provider organizations (PPOs) and point-of-service (POS) plans are familiar with the concept. These consumers pay lower out-of-pocket fees when they go to in-network doctors or hospitals vs. out-of-network providers.

Along these lines, many consumers have been enrolled in plans that categorize prescription drugs into tiers that charge higher copays for more expensive medications.

Consumer Education
Plans that introduce tiered provider networks hope to sensitize their members to the real costs of health care by transferring the costs of more expensive treatment directly to those employees who use it. Consumers who benefit from this approach will need to increase their knowledge about the health care providers they choose and the details of their health insurance policies.

For more information, visit the Agency for Healthcare Research and Quality at www.ahrq.gov.

© StayWell Custom Communications. Information is the opinion of the sourced authors and organizations. Personal decisions regarding health, diet, and exercise should be made only after consultation with the reader's own medical advisers. This material may not be reproduced for redistribution without written permission from StayWell Custom Communications.


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