Demand Fuels Expansion of Tiered-Benefit Insurance Products

January 26, 2017 10:31 am

Healthcare consumer preferences are evolving at an unprecedented pace. For both health plan and provider executives, it can be difficult to keep up.

BlueCross BlueShield of Western New York has historically relied on input from employers, brokers, and members to create insurance offerings that meet their needs; however, it was collaboration with local healthcare providers that led to the development of the products that have become BlueCross BlueShield’s fastest-selling options on public and private exchanges.

BlueCross BlueShield’s “align” product was introduced in January 2013 as the region’s first tiered-benefit health plan. In offering cost-sharing discounts via a newly formed independent physician association (IPA), along with the facilities of the region’s largest health system, Kaleida Health, the goal was to create a sustainable model with providers committed to offering integrated care at premium rates 6 to 10 percent below the rest of the market.

Aggregate premium rates have risen just 1 percent in three years for individuals on the public exchange, which has kept the align product attractive and relevant. When given the choice, one out of three BlueCross BlueShield individual members have selected align over products that offer a standard provider network.

This growth subsequently brought similar benefits and products into discussions with other health systems in our operating markets. In 2017, BlueCross BlueShield will launch its second tiered-benefit product, called “focus,” which features lower out-of-pocket costs at facilities within western New York’s other major health system, Catholic Health.

Similar to the align products, focus incorporates Catholic Health’s four hospitals and other select facilities into the lowest tier and leverages the health system’s care transitions program with its affiliated IPA, Catholic Medical Partners.

Delivering Lower Costs

Fundamentally, tiered benefits influence consumer behaviors by offering reduced out-of-pocket costs when members see a subset of providers for their health care.

By keeping members within a defined continuum of care, we achieve better outcomes, streamline processes, and reduce inefficiencies. This is an attractive proposition for employers, employees, and individual members, who also benefit financially from those improved outcomes. Meanwhile, partnering health systems can realize increased patient volume and cost savings from better-managed care.

The Need for Transparency

Tiered benefits are often associated with other restricted or narrow network offerings that may limit consumer choice and access; however, in tiered-benefit arrangements, members are presented with a full network but can take advantage of additional cost savings when they use specific healthcare facilities and specialists.

Understanding and effectively communicating this benefit is important to alleviate trepidation and improve satisfaction among all participating parties. It requires a great deal of education and transparency regarding the composition of each tier and the resulting impact to a member’s out-of-pocket costs.

In western New York, patient volume is largely split between Kaleida and Catholic Health. Based on myriad factors, many individuals and families have developed an affinity toward—and choose to receive their care from—one system or the other.

Offering two distinct tiered-benefit products, each providing access to one system or the other, reduces confusion. This approach also presents a marketing opportunity by leveraging the brand equity of both insurer and health system.

Future Opportunities

The market today expects lower-cost options that deliver high-quality care as healthcare costs continue to rise; past approaches won’t necessarily meet future needs and demands. With individuals becoming increasingly willing to accept health insurance plans that offer a limited network of providers in exchange for reduced premiums or out-of-pocket costs, health plans and providers have opportunities to create lower-cost solutions using tiered-benefit arrangements.

This is a fundamental shift that requires both parties to keep the endgame in mind. Aligning incentives and working together to create innovative, cost-effective delivery solutions will help us meet the demands of our customers.

Stephen T. Swift is executive vice president and CFO of HealthNow New York Inc., the parent company of BlueCross BlueShield of Western New York, Buffalo, N.Y. Read more entries on the  Leadership Blog.


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