In a previous blog post, we explored the narrow network trend that began with HMOs and resurfaced on the federal and state exchanges from the Affordable Care Act. In that post we also touched on some of the new entrants into the health insurance market like co-ops and health system-based networks. This is the first of a series of posts that explores these new entrants and their network structures further.
Historically, insurance companies built and maintained their own provider networks. As the healthcare market changes, new network organizations have become more prevalent and visible and existing networks have been put to different uses. These network organizations can be categorized into six groups: network leasing companies; CO-OPs; TPAs and other cost management experts; discounters; hospitals and health systems; and accountable care organizations (ACOs). Each of these categories has a slightly different perspective on managing provider relationships – some work closely with providers while others are at arm’s length – and it’s important to keep these differences in mind as you compare networks. This post takes a look at network leasing companies and future posts will examine the other types.
Network Leasing Companies
Many medical and dental networks use leasing partners to fill in service area gaps, meet network adequacy requirements, move into new markets, and grow their networks in general. There are two types of PPO networks that are available for lease.
Insurance companies take the financial risk for an enrollee’s medical costs and offer a network of providers who accept reduced fees for access to enrollees to control those costs. Staff at the insurance company recruit providers into the network and manage the ongoing relationships. When carriers have excess capacity in their networks, they sometimes decide to lease or swap all or part of the network to other companies. Lease arrangements earn additional revenue for insurance companies through monthly network access fees. Swaps fill in network gaps which can create a stronger sales advantage.
Examples of insurance company networks available for swap or lease:
- Medical carriers: First Health (owned by Aetna), ChoiceCare (owned by Humana)
- Dental carriers: Assurant, Aetna, United Concordia, Guardian
Non-risk PPOs offer providers a fee schedule for covered services and then sell access to the network to other entities, i.e. insurance companies, employer groups, associations, unions, etc. The company offering the PPO doesn’t take the risk for the enrollee’s medical costs. The provider’s contract is with the network leasing company and the leasing entity is one step removed. The network leasing company receives a monthly network access fee for every person who can use the network, although other arrangements are possible. These arrangements are popular in medical and dental networks with standalone companies and carriers offering their networks for lease.
Examples of non-risk PPOs available for lease:
Vision networks are also leased as non-risk PPOs or offered under their own names by medical or dental carriers where the risk is taken by the vision plan. EyeMed and Block Vision are active in this space.
When leasing all or part of a network, it is important to make sure that all providers are properly contracted to offer discounts to members. When networks are “stacked,” offering multiple networks within a service area to achieve higher discounts, providers can be confused about which fee schedules are in effect. Confusion in the provider’s office can lead to member dissatisfaction if the wrong coinsurance or copay is charged which ultimately leads to lost business. When leasing, be sure your network team works closely with its counterparts in your lease partner’s organization.
How does network leasing fit into your business plan? Are you looking at new service areas? Do you have network adequacy requirements to meet?