Narrow Networks Lower Costs

Today’s Managing Health Care Costs Indicator is 2.4%

The Group Insurance Commission (GIC), which procures health care for Massachusetts state and other governmental employees, announced next year’s health care rates, and the average increase in overall premiums will be 2.4%.  That compares to most actuarial estimates of rate increases between 7-9%.

How is the GIC offering such low rates?

In some instances, high rate increases in previous years allow for a rate increase “holiday.” That’s not the case here – the GIC has had lower rate increases than other governmental agencies for years. 

Dolores Mitchell, the long-time Executive Director of the Group Insurance Commission, says that the GIC will save $31 million when 10,000 members move into limited network health plans, which have far lower premiums.   The limited network health plans, being offered by each health plan with a GIC contract, don’t offer members the ability to go to certain hospitals and providers who have higher prices.   Each of the health plans also use some quality standards to determine their networks.

Limited networks can lower costs by:
  • Eliminating the most expensive providers from their network, or asking patients to pay the difference in cost.
  • Making it more attractive for ‘must-have’ hospitals to negotiate lower rates with health plans, which can threaten to put them in higher cost tiers, or eliminate them from the network
The GIC has offered limited networks for a few years – but there has been very low enrollment in these plans. The GIC will increase enrollment in the limited networks through:
  • Active enrollment -  all employees will have to sign up this spring for health insurance, not just those who are changing plans
  • Default option, for those who do not sign up for health insurance during the open enrollment, will be the lowest cost limited network plans
  • Those enrolling in the limited network plans will get a three month ‘holiday’ from premiums
This is a bold move.  If the GIC is able to achieve this low a rate of inflation through use of limited networks, it will increase the pressure for Massachusetts municipalities to join the GIC.