Lifespan, the largest health system in Rhode Island, and Tufts Health Plan are launching a tiered provider network, an approach that executives believe will control healthcare costs.
The Affordable Care Act “has really helped to focus both health insurers as well as providers on the development of affordable solutions for our customers,” Marc Spooner, Tufts Health Plan's president of commercial products, said of the new product, which goes live July 1. “That certainly was one of our primary drivers.”
Tiered networks are essentially cousins of narrow networks. Both options offer lower premiums for consumers, but they come with different trade-offs.
In narrow networks, members can only receive treatment at a limited group of providers. If they go outside that network, their out-of-pocket costs go up significantly—an issue that has irked providers and consumers alike.
Tiered provider networks are similar to the way health plans construct pharmacy benefits. With tiered plans, members still have the option of seeing the full array of providers, but certain hospitals and doctors are preferred and have lower patient cost-sharing. Preferred providers usually have higher quality rankings and perform procedures at a lower cost.
The new health plan, Lifespan Premier Choice, will be offered to fully insured and self-insured employers in Rhode Island. Tier one includes Lifespan's four acute-care hospitals, its children's hospital and 1,800 physicians. Additionally, all obstetrics or behavioral health services will automatically be covered in tier one, regardless of the provider, Spooner said. Tier two includes all other providers in Tufts' network and has much higher cost-sharing.
Members in the plans will have strong financial incentives to choose Lifespan hospitals and doctors. In one of the plan options, for example, patients would only have to pay a $150 copayment for inpatient and outpatient services at a Lifespan provider, Spooner said. But if members go to a tier two provider, they would have to meet a $2,000 deductible and then pay a 55% coinsurance rate.
In exchange for tiered options, employers and their workers pay lower monthly premiums. Lifespan Premier Choice premiums are expected to be 10% to 15% lower than broader network plans.
Some view tiered networks as a more palatable way to control costs and steer patients toward higher-quality providers without strictly limiting consumer choice.
“The out-of-pocket costs are substantially lower (in tiered networks) than they would be for out-of-network providers in a narrow network, but the two network structures use many of the same cost-control levers,” Elena Prager, a healthcare management doctoral candidate at the University of Pennsylvania, wrote in December.
But tiered networks have been criticized for what some call their confusing pricing structures. For example, hospitals and doctors with admitting privileges at those hospitals may not be in the same price levels, which could create surprisingly higher cost-sharing for unsuspecting patients.
Lynn Quincy, the associate director for health reform policy at Consumers Union, said at a Federal Trade Commission forum in February that many consumers may be completely unaware they are in a tiered network.
Spooner said Tufts is hoping to eliminate any confusion by clearly communicating the benefit structures to employers, brokers and customers. Tufts also will have online tools that help explain which tier specific providers are in.
“We don't want anybody to be surprised by this offering,” Spooner said.
About 7% of all networks associated with health plans sold on the ACA's individual exchanges in 2014 were tiered, according to a study last year by consulting firm McKinsey & Co. Narrow and ultra-narrow networks made up 41% of all exchange networks.