Narrow Networks and Community Owned Health Plans

Welcome to the Generous Benefits Podcast, where we help employers build people-first benefits that make business sense. I'm your host, Amanda Brummitt. Today, we're joined by Bret Brummitt to talk about the trends surrounding tiered networks, combining narrow networks with reference-based pricing and community-owned health plans. In this episode, we explore how these models work, why employers are considering them as alternatives to traditional plans, and what HR leaders need to understand about cost, access, and alignment with local providers.

Welcome, Bret Brummitt. Hey, thanks for having me back. Yeah, I mean, it is your show. It is, but whatevs.

Okay, let's start with, for anybody that doesn't already know you, give us the 30-second version of who you are. And today, I want you to then add to it how that experience has shaped your perspective on employer-sponsored health plans. Cool. So I am an employed benefits advisor that happens to own my own agency and have worked in the industry now for 20 plus years, everywhere from not knowing what I was doing to thinking I knew what I was doing to learning that I was needed to do it better and have always kept the client focus in mind.

And especially the employee focus on how everything that we give as advice and or the products that we sell impacts their daily life and have learned over time that even there, things that I thought were important were not as important and things that I thought weren't important were extremely important. So a mix of knowledge and humility based in the employee benefits space that has a good heart for human beings. That's a great description of you. Yeah.

And let's start with definitions. What is a neural network and how is that different from a traditional network? Yeah, for sure. So a narrow network.

I mean, if we go back historically, probably historically, we didn't have networks and health plans. We just had a fee schedule. Someone got paid. Then we started with networks, which was a provider says, we'll agree to this dollar amount, which is probably lower than our general billing charge because you're going to bring us more people or will be easier access for us.

I mean, that was the beginning of networks as a general. Then we had to the iteration of HMO PPOs, where HMOs were smaller networks, PPOs were larger networks. So the HMO is really the consciousness of a smaller, narrower network when we think of it in a super big, broad term. However, as everything in healthcare and general public knowledge is done, things have morphed, evolved, iterated over time.

And so now narrow networks are generally defined either as a narrow HMO network, a narrow EPO network or an exclusive provider organization network somewhere in that mix in between, or a standalone, almost bundling or private network or built around a specific employer and then launched to others. and that's really where we get it into place today. So if we want to think of like a narrow network where we live or operate primarily in the Texas area, we have a couple. We've got an EHN or Employers Health Network.

We've got an Imagine Health Network. We've got Healthcare Highways and several of these other area networks that started out as an employer building a network specifically for their employees at a lower price point or a vendor did this for them. And then that has then grown to be launched to others because it's grown outside just a specific city or county or section of counties or up and down an I-35 corridor or east to west off an I-20. You know, one of those situations has grown and worse because there's more employers that can utilize the same thing because what it is, is a lower price for said health care services than your big network.

So you do pay a part to have everybody on your health plan. so when you pay you know. A big national Blue Cross Blue Shield plan on their big national PPO, you are paying a premium to have as many doctors as possible because as an employer, you don't want the headache of the employee saying, my doc's not in here. My kid has super rare disease and they need to go here, but they can't because the network, you know, there's heartstrings involved here.

And so those are the big national networks. A narrower network just doesn't have everybody. And in trade for that, it is, again, directing care to those. Or maybe it's the conversation of removing a bunch of the other intermediate players in this so that we can come right to you and make payments faster and easier.

So it's some kind of exclusive, curated, narrower network in this situation we're talking about. And let me make sure I understood right. So some of those narrower networks that exist here in Texas, you're saying those started with an employer doing direct contracts for their employees, and then eventually they opened that up that other people could access those? Did I get that right?

You got that right. So I'll give you an example that's probably a couple of examples that are really relative. Whole Foods and Home Depot. So Whole Foods started building a network around their original Whole Foods store pub in Austin that were local providers.

And then they even employed some at one point in time. But as they grew and their footprint grew, they needed to contract in each location and city. So they have a vendor that goes out and makes these direct contracts and they work closely with that employer's health network EHN vendor to build that narrower network for their stores. Now, Whole Foods has also done something that I do want to get into around tiered networks, and they still use like a fallback message outside of that narrower network.

Another one is Home Depot. Like, we're all pretty familiar with Home Depot. Home Depot contracted or had a contractor called Imagine Health at one point in time. I think they might have had another name before that that was their central contractor for their store.

That's kind of funny. A central contractor for Home Depot. Not a general contractor. No, a health care network contractor built the health care networks that became their lower price point providers for their employees in exchange for a better price point on services.

Okay. Yeah, that's super helpful to have those examples. And then how are those neural networks then used, and I'll use your words, a stick or carrot approach to steering employees to wise or high value contractors? Yeah.

So generally the employer's choice, maybe sometimes it's some kind of product that has a choice that's building, you know, some kind of semi off the shelf product, or maybe some employer just dictating their own needs through a third party administrator or TPA. We will charge you $5 to go to your primary care provider on the EHN network. But if you don't want to use the one we've contracted with, then you've got either, you know, a 50, a 75, a $90 copay. So same level of provider, so same primary care provider, you know, in this carrot approach, I mean, it's actually getting both.

You're getting the low cost to even a lot of plans these days are moving to a no cost for that preferred or tier one provider or incentive tier provider to a high copay situation. So you just have a price differential as an employee or as a plane member, you just have a price point choice. You know that one is cheaper, one's more expensive. You may actually not even realize one is there if you're not paying attention to what's happening because that is still possible.

And we're seeing that more and more in both just a narrow network. And that's bleeding over even to plans that are designed on a variable copay level without the tiered network approaches. Gotcha. Okay, so if I'm an employee at a company that has one of these networks, if I choose their high-value clinicians, I have a financial incentive to do that.

And if I'm a princess about my health care, which we all know I am, then I might have a financial penalty if I go outside that and use who I want to use. Yeah, or you might actually, if the employer is more professional. Doesn't have that ability or that wraparound or functionality in there, you may have no coverage. Like from an insurance standpoint, to have a broad network even as a wraparound or a fallback, you're paying a price point in two levels as an employer.

You're paying a monthly per person access fee, and then you are paying a higher cost for said same similar medical claim. And you may even be paying both. You may be paying a portion of the claim as a percentage of savings as well as a monthly to that rep or wraparound network. So there's a lot of financial disincentive for an employer to have said network wraparound like fallback network.

And if that's not in the cards for your employer and your employer feels pretty good about your directed care, then that's going to be the so sad too bad. I mean, let's be clear, that is actually what I am doing more or less this year for our own health plan. We have said narrow network with EHN and we don't have a wraparound network. And so for us as an employer, if we have something that falls in between, we have to work a little bit harder if we want to make that amenable to go get an extra contract with said, you know, new provider for employees throughout the year.

And so that's a very challenging setup to do. However, we're small, nimble, and speak that language. So for us, it's not that bad. For other employers, it's really complicated and problematic.

That totally makes sense. And Bret, since you brought up our group, which is a pretty small group, but we are level-funded, that tells me that level-funded groups can do this. Is that just level-funded and self-funded, or can fully insured groups do this? As well.

Yeah, most things innovate and start with the self-funded employer. I mean, the self-funded employer has the highest financial incentive to be paying attention to their medical claims. Sure. So that employer looks for, you know, cost containment settings.

I like, I always feel like that's the world's worst moniker, especially if you have HR or employee ears listening, you hear, oh, cost containment, we're not going to get the benefits we got before. It sounds good, but it means we'll be able to keep the doors open and you'll have a job. Or it means pay raises might be there. Or, you know, there's other incidents for cost containment.

But cost containment is a moniker. It's controlling the costs that are going out. An employer doesn't necessarily have a limited set of dollars. But more or less, when we're talking about what's in the bank today, it's limited, even though there may be ways to increase the pie.

But, you know, you're looking for there. cost containment will bring the cost either down today or possibly bend the curve of the cost increase in the future. So cost containment do include steerage strategies. So this is a steerage strategy.

It does come from someone highly invested. Highly invested employers are self-funded employers. Self-funded comes down to level funded. Eventually, an employer does something that gets productized, and then it becomes market-wide.

So long-winded way of answering. It started there, and it is available all the way down... The waterfall or so to say for now because you every step has some ability and we're even seeing that in some of the fully insured off-the-shelf carrier products and actually i'll take it back to everything old is new again 24 years or so when i was selling a tiered approach plan there was a narrow network tier one broad network tier two and out of network tier three like that That was, you know, old school 1999 to 2002 health plan product that was out there, didn't actually sell that well back then, died and went away and has resurrected in the same structure.

So, I mean, we are not really in a new, it just actually has traction now, two decades later. Right. So like in Texas, Blue Cross HMO, is that considered a narrow network? I would consider that a narrow network.

However, when you're talking about designing a plan with steerage, you're generally not talking about that. You're not normally talking about a plan that has an HMO network tier one, PPO network tier two, like you're doing a plan. Like you're making that steerage at your purchase, either as an employer or an employee enrolling. What we're really talking about is you've got a plan, but now you've got different provider options that are available and flexible to you inside that plan.

And the thing you need to know is, generally tier one is way cheaper or free, tier two is less friction but more money, tier three, oh, we're out of network and maybe you don't even have coverage. So that's really what we're talking about in a narrow network approach today. And that is available even down to the smaller employers, specifically in both level funded plans, but we're starting to see iterations of that in the fully insured market. It's not rapid there in the smaller employer place because it actually doesn't really need to be yet.

So there's not enough underwriting criteria to say we've got enough employees that we can steer here. We're really going to save much more than we do today. So in that smaller market, what we're actually seeing are not using the tier network, but a variable copay method where you actually have to engage and open your app and find out if I want to go see Dr. Amanda.

Is she going to be 45 or 90 dollars based upon what we're going to go do today? Like that's a different level of steerage engagement that's not so much narrow network, but it's, you know, it's akin to this whole same structure, like either based on quality or cost of service, you're going to pay more or less as a member. Okay. And I've heard you talk about plans where you actually need to call like a concierge line and they will help direct that care to the highest value.

That exists. That exists right in a vacuum. It exists pretty good in a small limited area. And what I see is plans that get, you know, just larger populations are outside their scope.

It is actually still clunky for the member. And anytime you're asking someone, most people engaging in a medical visit of any kind, just doctor, especially upstream surgery and complex imaging, aren't really necessarily wanting any barriers. And they might all want to princess and just go get there right away, which is fair. Yeah.

Totally fair to do. However, if you have a plan that has a concierge, the idea is to help steer you so you can get right where you want to go. So back in that, you know, carrot approach, several of them will, if you call us first, we can then start to waive co-pays, deductibles, like we're giving you incentive to call that concierge to help guide you through to the higher quality or maybe even like, is this actually appropriate care? Most concierge aren't deciding appropriate care because most of them aren't medically clinical.

Some of them have a medical clinical component or person on their team, but most of them are giving you the, you know, we do have an arrangement here or just even high level, like, you know, say you've got to get a knee reviewed, like, well, this doctor has quality scores of 60 and the other one has quality scores of 80. Like, okay, well, why is one different than the other? Same exact specialty, same like now you're looking at finding quality. And quality scores generally do lead to a better outcome, which then leads to lower claims dollars, which leads to now we have a cost containment feature that allows an employer to keep the lights on, but also maybe pass those savings back to you in some kind of discount for that encounter.

I appreciate that you showed an example where really good care isn't necessarily the most expensive care. There's very little correlation between price and quality. In healthcare, that doesn't mean the cheapest one is the best either, but. Nope, not always.

And you've got to go, and it's hard. Like, as a consumer, having those data sources to know if it's a surgical situation, those are really easy to gather data metrics these days for most facility-based surgeries. In office surgeries, not quite so much. regular medical visits, talking to you, diagnosing you, sending you out the door, asking you to go on a treatment plan for, you know, three days to three months, medication, those aren't, really well tracked to metrics.

So it's super, what I'm saying is it's hard, it's really hard to get good metrics on a primary care or your general specialists that don't cut on you. Yeah. That'd be a whole good show of how to find a good doctor. You could do that later.

Fantastic. Okay. We've gotten down to more of a micro level. So I think this is a good time to talk about community-owned health plans.

What are they and how do they differ from traditional health plans? Yeah. So community-owned health plans, as we generally talk about them today, are a derivative of a Dave Chase moniker of an acronym. Actually, it's not an acronym.

That's actually spelled out for once. He calls them CHOPs because everyone acronym. HOP. Okay.

We're not going to call them that. We're going to call them community-owned health plans. We're definitely not. So that's part of the health Rosetta movement that's grown up in the last 10 years.

And they've pushed it out from that. The idea is that a community owns the health plan, cuts a lot of the bloat of a middleman out of it. Sounds really, really good to the ears and when practiced well is. So let's think communities.

Like what's a very simple community when it comes to a health plan? We talked about earlier, an employer in itself is a community. So you start on an employer-based health plan. generally you find a recipe that works well and then you say okay well what if we had other employer stakeholders in the success of this health plan what if they were partners in it working well financially so what if you did have a local pharmacist what if you did have a local multi-specialty primary care multi-specialty group and maybe a surgery center or surgery center in hospital they were all partners in this so this actually develops a lot in what the tier ones are made of when we talk about a narrow network, tier one network.

A lot of these are partnerships. Now, in its actual sense and intent, they are financial players and the cost drivers and performance of the health plan. In theory, that is what a community, like the provider, the employer, everyone's in alignment from a financial outcome and a health outcome. So if your doctors are getting the patients they need and the doctors are actually doing well by your employees, then you will save money.

Everyone's really happy, copacetic. It's working on a community basis. It actually comes from the idea of like, what if we actually had, you know, 30 employers and we actually track the health outcomes of those because they're in a close knit community of some kind. That's a community owned health plan in theory.

I have seen very little movement in that actually coming from that because this is really become productized and it is broker advisor driven. And sometimes third-party administer private companies building on these things, which are some derivative of a self-funded health plan. Sometimes that community has grown beyond just that, you know. That one employer, maybe it's a multiple arrangement of employers or a captive, per se, a bunch of employers banding together.

So, I mean, a captive is actually a really good example of a community-owned health plan because the employers are co-owners of the reinsurance or stop-loss insurance. So, they own the actual insurance mechanism together as multiple employers. So, they actually band together to get stop-loss pricing in that captive. Now, the cynic in me says, that's cool.

they basically band together, own some of the captive, and someone else owns all the rest of the captive, and you're not really getting the full intent. But it's a beginning gateway. Should it just be called a community health plan and not community-owned health plan? What I'm hearing is the ownership structure may or may not have anything to do with it.

Yeah, but now we go back to the history of your world, of the HCA Columbia world, where they had community health plans, and now we've just taken, you know, 30 years of words and jumbled them upon each other again. So, but the intent, like community-owned health plan, there is some group of people who have financial rewards for good health outcomes. That's really what it is. But it became very popular, sexy, sexy, to sell.

And so it was productized, maybe a little bit too fast by some vendors that started up, sold a ton and have already had huge financial failures. So, you know, again, a few bad actors have soured the concept that actually has a really wonderful, beautiful concept behind it. But again, it's a community-owned health plan. And so when you try to move it outside of a specific region, it becomes really hard to control that, like, are we improving this community?

Now, define your community different. And if we're talking about 18 auto shops across 18 nations and the community is a captive of like-minded auto shops, well, now it's a different thing. But the local contracts may be a small thing to pick off on those cost containments versus other areas where spread out geographic employers might go at one time to start with cost containment. Have you seen one where the literal community owns it?

No. The city of Austin, or like the residents of Austin own, like it's a co-op or a non-profit. This is where my desire to actually build the co-op with that city development co-op of like, how do you build a co-op that truly owns that? At least the stop-loss piece of the product.

Because the stop-loss piece is where the financial performance really comes into play. So if that was the case versus, you know, a private equity, a VC, a brokerage, just actually an MGU, which is the managing general underwriter that sells stop-loss, if it wasn't an institution that owned the actual piece, it would be a lot more heartwarming than it is that it always goes back to a financial investor. However, give a financial investor like some credit because these things don't get started without someone taking on the financial risk.

And that's very hard to put the financial risk. Like would I want to start a co-op, put up financial risk and then give it away to a city community township? I would with the caveat that I have enough money that I'm good to just give it away. Like you almost have to be philanthropical with it from that standpoint.

So Brett, tying in narrow networks and community-owned health plans, where do they create the most value for employers and what trade-offs should HR leaders be aware of? I mean, the value really comes into, can you structure a message that the employees will understand that aligns with your financial outcomes? So a tier one network is very easy to understand. So if we go back to, you know, our, some of our auto motorcycle dealership clients, you know, if they're in the DFW area, they know that that Baylor Scott and White hospital and doctors network is like the hub of their tier one network.

So it's really easy to define, like, I don't have to think too much and I know. So that is a good value tradeoff. And learning through that, also, if you have a hospital hub, which is going to be your higher cost area, if you can make sure the alignment process of your lower line goes through that same process, then it makes financial incentives cohesive. So if the Baylor doctors in that scenario are like zero to $5 copays, then they're going to be in that specialist system of the hospital.

So those areas of making sure the alignments are easy. Having a network name like an employer's health network known to the employees so that they understand that that is their tier one network is super easy. Having a health plan like High Plains Health Plan where all the tier one providers are named High Plains Health Plan providers. Like if the messaging is easy, then the membership can then learn.

If the messaging is complicated, the membership will never learn and the steerage is super complicated. So if you just say incentive network, how do I learn who my incentive network is? Like that's, you've already created a barrier. So the way you can speak in a more commonality to it, the easier the member experience is and that gives your steerage on a narrower network.

Appreciate that. And then if there were just one last piece of advice that you would give to employers or HR leaders that are considering this strategy for the first time, what would it be? It is really useful to keep in mind what your ultimate goal is. Like, is your ultimate goal, we're out of money and we have to do cuts now?

Is it that we can't sustain this if we keep doing this five years in the future? Or is it we want to invest in the overall health of our employees? Now, those are not mutually exclusive ideas, and all three may very well exist at the same time. But if you're starting with the, I want to invest in the health of our employees.

Then now, like, what are those programs you can build a narrow network that maybe isn't even all-inclusive? Maybe it's just primary care. Maybe it's primary care, mental care. Maybe it's primary care, mental care and physical therapy.

We can go find these providers that build high impact for your said company so that you can start chipping away at some of those price points so that you can give better access to care. So when you do those type items that isn't predicated on surgeries and hospitals, we can really make impacts to your employer by building a customizable or at least a themed narrow network into your plan to provide those easy access points. Now, those also should have some kind of financial incentives or controls in them that does have some kind of long term trickle down to bending the overall cost or even reducing cost up front.

But if it's the, we got to go quick, we got to go fast, and we got to go, you know, at this financially first, you know, now you've got to really figure out, are we good with only having a third of the doctors and hospitals in our region? If we're good with that, then we're going to have to stick by our guns because financially we can't make a lot of deviations from that. And then we're going to go, it's going to be a little bit of a bumpy road of implementation. So, you know, figure out, is it financial...

Is it long term first? Figure out where you're going to play. If it is going to be financial and you're going to have to make the cuts. Try to go figure out which of those vendors already have the vast majority of the ones you already see through like your network access reports.

Because if we're going to cut a third of the hospitals out, that might only be 10% of the providers that people are already seeing. So it may be a no brainer almost. Take the time to look through those, but ask the questions because the answers are generally available. Sometimes the answers are not.

You just got to take a flyer and see what happens. And that's actually okay, too, as long as the messaging is you are our community. You are employees, are our community. We have to do right by you.

Part of doing right by you is having a product to offer and not just absolutely killing your wages. And that's an okay message. It may not be a great message, but I think it's a very understandable message that we're concerned about your health and your financial stability and freedom, or not freedom necessarily, but your financial outcome in our company. Okay.

Well, Brett, thank you for explaining this nuanced topic and for giving us your time. Thanks, as always. Big thanks to Bret Brummitt for breaking down tiered narrow networks and the history behind community-owned health plans and what they mean for employers navigating rising health care costs. This is the Generous Benefits Podcast, where we keep it practical, personal, and people first.

Thank you.