1.
DIRECT TO EMPLOYER
Narrow Networks in the
“New Exchange World”
September 2014
Webinar

2.
DIRECT TO EMPLOYER
NARROW NETWORKS IN
THE “NEW EXCHANGE
WORLD”
Suzanne Sentman
Ernie Tsoules

3.
ABOUT US
Suzanne Sentman
• HR Director
• McKonly & Asbury
Ernie Tsoules
• Partner
• Rhoads & Sinon LLP

4.
DISCLOSURE
This material and any accompanying remarks are provided for
informational purposes only and nothing contained in either should
be taken as a legal opinion or as legal advice.

5.
TODAY’S AGENDA
1. What is driving change in health care?
2. What new business models are emerging for health care
providers, plans and employers?
3. What is a “Narrow Network” and “Direct to Employer”
(“DTE”) ?
4. Current Adoption of Narrow Networks and Private
Exchanges
5. Legal and Regulatory Issues

6.
WHAT IS DRIVING CHANGE IN HEALTH CARE?
1. First and foremost, cost and quality – we are first in highest health
care cost and last in quality performance among industrialized
countries!
2. Affordable Care Act
3. Consolidation at all levels – hospitals, physicians, health plans and
employers
4. Consumer driven, “retail” health care; High deductible plans
5. Disruptive models reacting to all of the above-Walmart, Walgreens,
CVS, Venture Capital, Price and Performance Transparency
6. Public and Private Exchanges
7. Payment and Delivery System Changes

7.
WHAT NEW DELIVERY AND PAYMENT MODELS ARE EMERGING
FOR HEALTH CARE PROVIDERS, PLANS AND EMPLOYERS?
• Clinically Integrated Provider Networks and ACOs
• Provider Health Plans
• TPA Functions
• Employer consolidation and self-insurance
• Pay for performance instead of pay for value
Quality Incentives and PCMH
Shared Savings
Bundled Payments
Risk and Global Capitation (“PMPM”)
.

8.
WHAT IS A CLINICALLY INTEGRATED ORGANIZATION?
Delivers care that is
safe, timely, effective,
efficient, equitable, and
person-centered
Aligns physicians and
hospitals around a
common purpose and
supports a sustainable
relationship
Strives to eliminate
health disparities among
defined populations
CIO

9.
Collective responsibility for the health of a
specific population, not just patients
CIO
Providers are paid for
efficient and effective
outcomes rather than
paid for volume
Providers collaborate
for better quality &
care efficiencies
A CIO’S PURPOSE…
CONFIDENTIAL-PROPRIETARY INFORMATION

10.
PROCESS OF PROACTIVELY MONITORING AND CARING FOR A POPULATION
CONFIDENTIAL-PROPRIETARY INFORMATION

11.
WHAT IS A “NARROW NETWORK” AND “DIRECT
TO EMPLOYER” RELATIONSHIP?

12.
WHAT IS A “NARROW NETWORK”?
• Tailored, tiered and high performance provider networks focused on quality and with substantially
lower premiums by restricting network participation to the most effective/efficient providers and/or by
having different deductibles, co-pays and coinsurance for providers in different tiers of the network.
• Payment mechanisms can include performance based contracts, bundled care/episode payments,
shared risks and savings, capitated budget with prices at 15% to 25% below PPO/HMO rates.
• According to most plan sponsors, current narrow networks are selected based on quality and cost
metrics, not simply price or FFS rates.
• Akin to HMO networks of the 1990s, but now quality matters.

13.
WHAT IS A “NARROW NETWORK”?
• Original Narrow Networks focused solely on securing price (FFS rates) concessions from
providers. Latest version focuses on “Value” - which includes reduction in overall health care
costs across the health care continuum for an employee population, quality performance, patient
satisfaction, wellness and well-being, care transitions, and addressing socioeconomic factors.
• Clinically Integrated Networks (CINs) offer a strong foundation (access and market coverage, care
delivery model, physician alignment) that can move the needle on quality and costs. Thus CIN can
be a foundation upon which Narrow Networks can be built.
• Geographic market or sub-market characteristics will drive size, structure, focus of what a Narrow
Network looks like (payor or provider concentration, population demographics, employers needs,
etc.)

14.
WHAT IS A “DIRECT TO EMPLOYER” RELATIONSHIP?
• A “direct to employer” or “DTE” relationship is one where an organized provider network (CIN,
ACO, etc.) contracts directly with a self-insured employer to deliver care to all of that employer’s
employees, rather than the employer contracting with a large health plan to serve as the
employer’s TPA and network
• A health plan as TPA will often also offer a narrow network product
• Employer plan design influences the impact of a narrow network
• The term “narrow network” has developed a negative meaning in the market, among employees
and employers, since it infers a lack of choice for employees in selection of their health care
providers-new branding is occurring around “select networks” or similar terms

15.
MARKET EXAMPLES OF DTE NARROW NETWORKS
• Banner Health
 24 hospitals in 6 states
 DTE and Public Exchanges
• Cleveland Clinic
 National Heart and Orthopedic Care
 Large Regional Physician Groups
 Lowe’s, Walmart and Other Similar Sized Employers
• Aurora Health- Anthem Blue Cross
 Provider-Payor Partnership (“Blue Priority”)
 1500 physicians; 1.2 million patients; 15 hospitals; 160 clinics

16.
MARKET EXAMPLES OF DTE NARROW NETWORKS
• Imagine Health
 Imagine Health is a builder of custom, high-performance teams of the highest quality
providers for employers with large concentrations of employees in a single geographic area.
 We are not a network
 Working with Fortune 500 employers in markets across the country
 Assistance with plan design, but do not provide TPA functions (claims processing; population
health management)
 IT, social media solutions, apps connecting employees with teams

17.
CURRENT ADOPTION OF NARROW NETWORKS
AND PRIVATE EXCHANGES

18.
PUBLIC PERCEPTION OF NARROW NETWORKS

19.
OVERVIEW OF EMPLOYER MARKET SIZE: SIZE MATTERS
Census 2011 Data KFF 2013 Data KFF 2013 Data KFF 2013 Data
Firm Size Category # Firms # Employees
Avg
Employees/
Firm
% of Health
Insurance
Coverage
# of Firms
with Health
Insurance
Coverage
# Employees
with Health
Insurance
Coverage
% in
Self-
Funded
PLans
# of Firms
with Self-
Funded
Plans
# of
Employees in
Self-Funded
Plans
% in
High-
Performing
Provider
Network
# of Firms
with
Provider
Networks
# of
Employees
with
Provider
Networks
3-199 Workers 4,918,906 45,221,894 9 46% 2,262,697 20,802,071 16% 362,031 3,328,331 23% 520,420 4,784,476
200-999 Workers 52,082 16,168,700 310 63% 32,812 10,186,281 58% 19,031 5,908,043 22% 7,219 2,240,982
1,000-4,999 Workers 7,622 14,410,822 1,891 67% 5,107 9,655,251 79% 4,034 7,627,648 32% 1,634 3,089,680
5,000 or More Workers 2,281 37,411,422 16,401 58% 1,323 21,698,625 94% 1,244 20,396,707 33% 437 7,160,546
4,980,891 113,212,838 2,301,938 62,342,228 386,340 37,260,730 529,710 17,275,685
Notes:
Total of 144MM people employed in the USA for 2013, of which 9MM are self-employed, and 22MM work in government.

20.
OVERVIEW OF EMPLOYER MARKET SIZE: SIZE MATTERS

21.
PRIVATE EXCHANGES
• Private Health Insurance Exchange: an online market place where people can shop for
insurance products, and the employer will make a defined contribution towards the
insurance cost.
• Option 1 – allow employee to choose from a variety of plans from one company
• Option 2 – allow employee a choice of plans from several companies
• Traditional plan management (renewals, program administration, customer service)
can be outsourced to Exchange operators
• Employers are warming up to the concept of Exchanges, but yet are slow to adopt over
the next several years
• More than 1 in 4 employers will move to a private exchange in the next 3 -5 years

22.
PRIVATE EXCHANGES
• By 2017, 1 in 5 Americans will purchase insurance from non-government run exchanges
• Recent AON Hewitt Report:
 Exchange saved more than $750 per worker; lower trend than non-exchange coverage
 In 2015 3 million workers in private exchanges; more than triple the amount in 2014
• IBM, Walgreens, Sears, Darden Restaurants sent their employees to Private Exchanges in
2013-2014
• AON Hewitt started private exchanges for mid-size companies; what about small employers?
• Buck Consultants, Mercer, Towers Watson, AON Hewitt and various health plans are launching
private exchanges to meet this expected demand.

23.
LEGAL AND REGULATORY ISSUES

24.
LEGAL AND REGULATORY ISSUES
• Despite move to networks designed to include providers who can best impact
cost and quality, access concerns are still an issue
• Challenges by providers excluded from the “narrow network”
• State regulators threatening open access requirements
• Innovative options developing
.

25.
LEGAL AND REGULATORY ISSUES
Brown vs. Anthem Blue Cross of California
Insureds claim that BC allegedly misrepresented that certain providers
were participating providers in an exchange network
Lack of transparency by Anthem regarding the new networks, and insureds’
expectation was continued access to Anthem's "broad-based" PPO
network.
Takeaway - Perceived misrepresentations regarding coverage options and
narrow networks may result in unwanted litigation to redress coverage
denials.
.

26.
LEGAL AND REGULATORY ISSUES
Swedish Children's’ Exclusion from Exchanges
Lawsuit against Washington state insurance department and 4 of 6 exchanges for
lack of access, based on negative impact as “out of network” provider
State regulators and patient advocacy groups press for “open access” requirements
(not the same as “any willing provider laws”)
Takeaway – Regulatory challenges will continue and it remains to be seen what
impact that has on the goals of HCR and narrow networks –reduce cost; improve
quality
.

27.
LEGAL AND REGULATORY ISSUES
Is Innovation the answer?
Monocle Health Data
• Only company providing unbiased healthcare provider rankings (severity
adjusted) based on price efficiency and quality, for both episodic care and
chronic illnesses.
.

28.
LEGAL AND REGULATORY ISSUES
• Monocle uses multiple credible sources (Big Data) and software programs so
users (patients and providers) can find the most efficient providers with the best
quality for their specific illness — in just five easy steps on a web-based platform
• Think Match.com
• Allows patient choice within a broad network, while making sure that choice
impacts costs and quality
.

29.
CONCLUSIONS
• The way health care is delivered and paid for is changing and will not return
to the status quo
• While government may have initiated “health care reform” ….
• DTE, Narrow Networks and Private Exchanges will make this change
permanent due to the sheer size of the employer markets
• Innovation will continue to evolve what these models look like
.

30.
QUESTIONS AND DISCUSSIONS