The rise of the micro-network health plan, and what it means for employers, patients and providers.
The U.S. healthcare system experienced a tumultuous 2013, with many industry observers anticipating continued transformation in the year ahead. The health insurance marketplace opened with a rocky start, key mandates were delayed, the adoption of self-insurance spiked and health plan services companies introduced innovative solutions for employers facing onerous Patient Protection and Affordable Care Act mandates.
As the watershed year for PPACA implementation, 2014 promises to deliver additional changes. Hospitals will work to hold down expensive readmissions. Employers will assume greater influence over employee behavior through increased or discounted premiums, and consumers will create greater demand for value.
With millions of Americans' health insurance plans being disrupted and/or changed, total spending will rise, and health plans will increase premiums to guard against financial risks. In general, the year ahead will be marked by:
• Consumer and employer demand for more information on cost and quality
• Employer need for aggressive and creative tactics to exert continued downward pressure on healthcare costs
• Employer exploration of new health insurance options through private exchanges
• Social, analytics and cloud technologies as new drivers of the health industry's business models
The newly patient-centric environment will be characterized by perception among price-sensitive plan members that expensive medical treatment does not equal better quality. What's more, expect to see widespread adoption of mobile health technologies and increased consumer preference for employers to offer a choice of three to five health plans.
To meet new challenges, health plan services companies have developed new strategies that offer a broader set of financing options and customizable plan programs for employers, such as self-insurance and partnerships with provider groups that enable employers to take advantage of deep discounts and give employees greater access to coordinated care.
Among the innovative solutions introduced in 2013, employer-sponsored health plans with narrow networks, sometimes referred to as micro-networks, are likely to see an upsurge in 2014. Micro-networks are designed to give employers an opportunity to comply with health reform mandates and curb healthcare costs without sacrificing employee healthcare benefits.
Micro-Networks: An innovative solution to the high cost of reform
Micro-networks are healthcare systems that have organized to create high quality physician networks that rely upon the support of health plan services companies to provide robust, targeted access to care. The concept revolves around channeling health plan members toward specific providers by incenting them financially — much like successful retail strategies.
By being consistently rewarded for utilizing providers that cost them less out-of-pocket, plan member health behavior is likely to change population health, with better individual health outcomes and reduced expenditures for all.
Self-insured plans have several advantages over fully insured plans in terms of lowering costs and, with the addition of stop-loss insurance, limiting claim exposure to a specific amount to avoid catastrophic claims. Micro-networks take these advantages to the next level by:
• Allowing greater control over healthcare costs
• Providing better value for every dollar spent
• Giving patients a superior level of care
• Enabling complete integration of patient care (health system may be a virtual network of providers that are not in a centralized location)
• Improving communication among healthcare providers
• Helping physicians to make more informed decisions
The effectiveness of a micro-network program lies in its advanced technology and ability to:
• Electronically integrate providers across the healthcare continuum
• Eliminate redundancies in patient treatments
• Prompt preventive screenings
• Promote rigorous coordination of care
All of this helps to limit exposure to high-cost emergency procedures. In today's healthcare environment, this level of technology is critical, especially in light of two critical facts: Chronic conditions account for 25 percent of all medical costs, and an employee with a longstanding illness usually means higher healthcare expenses and lower productivity.
Given a micro-network's ability to identify potential health risks and close gaps in care, self-insured employers can reduce the high costs of chronic and debilitating illness, while saving money without restricting plan member healthcare.
Maximizing benefits, minimizing costs
A physician micro-network should demonstrate value, and substantiate cost and performance through aggressive administrative capabilities, effective operations, clinically integrated quality and data-driven enterprises. In addition, it should aid in the design of effective health and wellness programs and incentives and enable easy access to comprehensive patient health data with information flowing to a unified patient record.
Other optimal features include the ability to:
• Provide the framework for encouraging the effective utilization of local hospital and physician services
• Provide true population management on an integrated platform
• Enable the micro-network of physicians to brand their organization and create an infrastructure to support the participation and commercial requirements for "accountability"
• Position the micro-network to compete and operate effectively
• Provide a solid base for meeting the new incentive paradigm that rewards value, not volume
The two driving forces behind the effectiveness of micro-networks — robust care coordination and chronic condition management — allow plans to enhance benefits and curtail cost by offering highly competitive rates.
Improving health, lowering costs
Studies show that patients who are more actively involved in their healthcare choices achieve better health outcomes and incur lower costs. This news has prompted employers to implement strategies designed to actively involve plan members and educate them about their conditions, health and wellness options, and medical options.
Customized plans that promote the use of physician micro-networks and services enable plan members to receive richer benefits and lower cost sharing. When more members utilize this network, employers are better positioned to more closely manage care through the hospital system’s population health management tools, including use of claims and lab data to better engage plan members who need it most. This allows for timely interventions to prevent catastrophic health issues, improve health and wellness patterns, and provide a clear picture of the population’s healthcare use behavior.
Optimizing the micro-network
Ideally, micro-network options should be pre-defined, allowing employers to choose from various levels. For example the first level should offer the most cost-effective option, with deep discounts, superior coordination of care and emphasis on prevention — and lower costs for plan sponsors and members.
With this level, the health system serves as the nucleus of the product, with the healthcare service firm PPO relationships serving individuals who go outside of the nucleus for care, at a slightly higher cost. The last level serves members who go to out–of-network providers, at a higher cost.
For health system leaders, physicians and the health plan services firm, the common goal is to provide high-quality care at the right time, in the right setting and at an affordable rate. Such a dynamic working model benefits the employer and maximizes the benefits of self-insuring.
Value-driven healthcare
Self-insured employers are looking for diverse provider networks and evolving medical management services that cut healthcare costs — not employee coverage. With advanced technology that enables earlier identification of potential health risks to avoid costly, chronic and debilitating illness, physician micro-networks can do just that.
Progressive methodologies give employers greater control over their healthcare spend, better value for every dollar spent and a superior level of patient care. The micro-network strategy also allows for complete integration of patient care across the continuum, helping physicians to make more informed decisions and be better able to meet patient needs.
In 2014, expect to see more self-insured employers partnering with health plan services companies and provider groups to save money — without restricting their employee's healthcare — and improve cost efficiency. As the micro-network strategy gains popularity, more mid-tier self-insured employers will no doubt take the opportunity to offer quality, comprehensive benefits. Likewise, more hospitals and physician groups will expand their reach; more employers will be empowered to design, sponsor and control benefits; and more plan members will gain access to the value-driven healthcare they expect from reform.
Joseph Berardo, Jr., is the chief executive offer and president of MagnaCare, a health care services company administering self-insured health plans.