Medical Insurance Networks Help Reduce Costs
If you have had medical insurance then you are familiar with medical insurance networks. Insurance networks are a part of almost all insurance plan nowadays, and while they can be confusing, they are beneficial to the plan participant, the medical plan, and the providers of health care services.
Overview of Medical Insurance Networks
The benefits plans of almost all modern medical insurance plans have insurance networks built in. Whether the plan is a PPO or HMO, the plan participant is being steered to an in-network provider. The most common method of this steerage is with reduced out-of-pocket expenses for visiting a provider that is in the insurance network. For example, if you get sick and need to go to the doctor, your plan may only require you to pay a copay of $25 if you see a physician that contract with the insurance network. However, if you go outside of the network you may be required to pay a deductible plus coinsurance.
To add to this equation, some insurance companies are adding a new layer to their in-network provider that rewards physicians and facilities that provide coverage in a cost-effective manner while still serving their patients at an elite level. For example, United Healthcare now has a Premium designation for certain specialists. If a plan participant sees a Premium specialist, the copay is equal to the Primary Care copay instead of the Specialty copay.
Stay Away From Balanced Billing
If a plan participant goes outside of the insurance network, the physician can bill the patient for any fees not paid by the insurance company. In-network physicians have contracted rates and are not allowed to "balance bill" their patients.
Discounts From Medical Insurance Networks
For medical plans, the insurance networks are important because they provide discounts off of the billed amount that providers charge for their services, thus lowering the plan cost. While the differences in discounts between carriers may not seem like much, the discounts can add up to a lot of money. For example, if an employer group has $10,000,000 in claim expense while receiving a 50% discount, the billed charges are $20,000,000. If the group was getting a 55% discount through the insurance network, the claim expenses would only be $9,000,000. So what seems like a small 5% difference adds up to $1,000,000 in this example.
Some employer groups look at insurance networks and the discount associated and scoff at the notion that the discounts actually mean anything. Some may equate it to a jewelry store that doubles the retail price and then brags about its 50% off sale. However, while that could be true with insurance network discounts in a vacuum, the discounts are extremely valid and important when comparing two insurance companies. In the example above, the insurance company with a 55% discount would save $1,000,000 over the insurance company with a 50% discount.
Some insurance companies will try to make up the difference by lowering administrative costs, but rarely can administrative fees make up the difference of a wide gap in insurance network discounts.
Benefits to Medical Service Providers
Medical service providers can also benefit from insurance networks. The reason providers join networks is that it drives patients to their offices. They have to accept discounted payments, but these payments get them on the list of in-network providers that plan participants use to choose a physician or facility.
Some providers choose not to join the insurance network. Some specialty groups do this more often than others. This is because they feel that people who need to visit them will see them regardless of the network designations. Many times, the specialist will still work out a payment plan that does not subject the patient to full out-of-network responsibilities.
Frustrations, But Worth It In The Long Run
Medical insurance networks can be frustrating, especially if your favorite doctor decides to leave the network. But overall, these networks are beneficial to all involved and help keep medical costs down, which is something everyone can get behind.