What is health insurance tiering, and how does it work?

Mandated in 2010 by an amendment to the 2006 Health Reform laws, tiered network health insurance plans are designed to save money and provide choice to consumers, while incentivizing doctors and hospitals who surpass quality and affordability guidelines. In a tiered network, individuals pay higher or additional copays depending on the pricing tier of the hospital or facility.  Insurers assign doctors and hospitals to tiers using a formula of quality and cost measures. Premium for a tiered network plan must be at least 12 percent below standard plans, often much more. Tiered networks now make up as much as 15 percent of the Massachusetts health insurance market.

“This is a perfect triangle of interested parties—consumers, health plans and providers—and gives consumers a great stake in the reduction of health care cost.” -Barbara Anthony, MA Division of Insurance

Which MA health insurers offer tiered plans?

All of the major MA carriers are now offering tiered network plans, with new plans and modifications occuring regularly. Blue Cross Blue Shield of MA, the largest MA health insurer, also has the most extensive tiered network plans.  BCBSMA launched their Blue Options tiered deductible plan in 2010, and in 2011 they added Hospital Choice Cost sharing as an optional feature for all their HMO and PPO plans.  Fallon Community Health Plan is launching a tiered product for Western  and Central Massachusetts in April, 2012.  Both FCHP and Tufts Health Plan are now offering limited network HMO plans in partnership with Steward Health Care, serving Eastern MA businesses. Harvard Pilgrim is launching a new tiered network called Focus Network- MA, which will be available across most of MA starting in April, 2012.

Why an Employer might consider offering a health insurance plan with hospital tiering:

• Employers have more affordable plan options to choose from while still offering employees robust benefits.
• Members can cut their out-of-pocket costs when they seek care at one of the designated high-quality, lower cost hospitals in the network.
• Members have access to higher cost hospitals, though at higher costs.
• Provides incentives for members to make more educated and cost-effective provider choices

Health insurance tiering sounds confusing, is it worth it?

There have been complaints that tiered networks can be confusing to use, and some doctors and hospitals are frustrated that they are in different tiers for different health plans.  Massachusetts will soon require that health insurers use the same set of quality criteria. But hospital and physician ratings might still vary because insurers will still weigh the criteria differently and because the prices insurers pay for office visits, tests and procedures are not the same.  These issues notwithstanding, we believe that tiered networks are important for business owners to consider when evaluating group health insurance options.

Companies looking to purchase a new group health insurance policy, renew a current policy, or considering a change in coverage should contact Waugh Agency, LLC for a comprehensive comparison of all available plans.