Home > Employee Benefits > Tufts Health Plan leads with Steward discount network offering

Tufts Health Plan leads with Steward discount network offering

Earlier this month, Tufts Health Plan and Cerberus-backed Steward Health announced a new insurance product promising discounts of 15% or more for Massachusetts companies that buy group health insurance with a limited network of Steward providers.

Steward has acquired a number or primary and tertiary care providers in Eastern Massachusetts. While Steward had been considering a plan to sell insurance direct, present laws do not allow them to become a risk taker. Instead, they have partnered with high-quality insurer Tufts to offer a new “value” offering to the market. We at William Gallagher Associates certainly applaud both organizations for bringing more choice to a landscape that needs more competition.

But, the question remains, should you sign up your company for this plan? We think that we have read this book before and have some advice for companies that might consider the new plan.

First, there is the obvious to consider. The plan encourages use of a limited set of providers. So, employees who get their health care for providers outside of the network face the difficult choice of paying much more out-of-pocket or changing their doctor and hospital. That won’t make an employer very popular in an environment like Massachusetts where employees have had more choice of high quality providers than perhaps anywhere in the nation.

But, the savings for a 200 person company might be enough money to pay for a couple of jobs. And there are still plenty of employers who are desperate to reduce their healthcare costs now. As a result, many employers will kick the tires on this plan.

As referenced above, we have seen any number of innovations in the market over the years and a pattern usually emerges. These innovations can be priced with steep discounts early in order to gain market share or based on projected levels of savings. But, later, when utilization or discounts do not materialize as projected, insurers will punish their new customers with much higher than market increases two and three years later. Steward and Tufts will need to work closely as this product unfolds to anticipate the unique healthcare needs of a very diverse population of members. It will certainly have its bumps.

So, is this plan a mirage or a bait-and-switch? Not in our minds. It is an opportunity. But an opportunity that comes with some risks. For employers who are willing to take the risk of employee backlash, the savings will be real even though the savings may subside significantly two or three years later. And the employers that do best are the ones that brave up and take the plunge early, garnering a couple of years of significant savings. Those companies that wait around for eighteen months to see if this plan will really work usually get the least amount of savings.

All of this makes sense, of course. The life cycle of a new product in insurance is not much different from that of any other innovation. But, the purchase of health insurance has an emotional element since it touches everyone in an organization. Managing change is the real challenge.


About the Author

Christopher Nadeau is a Principal at William Gallagher Associates (WGA) and head of the Employee Benefits Group. Mr. Nadeau counsels his department to develop and redesign employee benefits programs to match the corporate philosophy, long-term needs and objectives of their clients. He is also an industry leader on Healthcare reform and the cost impact and administrative burden on employers.

617.646.0351 | CNadeau@wgains.com | Follow Chris @Chris_Nadeau
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