I recently sat down with Stacey Richter on Relentless Health Value to talk about carrier networks: what they are, what they've become and what employers can do about it without blowing up their members' access to care. Here's the core of what I shared.
Key takeaway: Network discounts do not necessarily mean lower healthcare costs. Employers can evaluate networks using negotiated rates and their own claims, contract directly where appropriate, tier benefits by site of care and pay for episodes rather than individual services.
What is a health insurance network?
At its simplest, a network is a set of contracts between a carrier and providers, plus a mechanism for making sure those contracts are honored for whoever is buying access to them. That sounds manageable. In practice, the contracts have become extraordinarily complex, and many depend on other contracts. That layering produces cross-plan offsetting, shared-savings arrangements nobody can fully explain and pricing that is very hard to verify.
That's the network myth. Employers are told the network is the value. But if you can't subtract what you should have paid from what you did pay, you don't actually know what you're saving. Marketing tells a story. The data is the source of truth.
Three problems hiding inside the status quo network
Stacey called it a three-headed monster. I think that's fair.
1. The illusion of discounts
Most network value is sold as a discount. But a discount off a chargemaster price is a discount off a number nobody can defend. A 2023 Health Affairs study found that cash prices were lower than median commercial negotiated rates in 47% of the price comparisons studied. If the negotiated price isn't better than what someone could pay walking in the door, it's worth asking what the network is actually delivering. Without the denominator, you're negotiating blind.
2. Payment integrity
Even when you know what the contracted price should be, confirming that you paid it is another matter. Many claims still run through adjudication systems built on decades-old mainframe logic, layered with contract terms that have grown more complicated every year. Billing error rates are high. When accuracy isn't checked up front, the cost lands on whoever has the least leverage: patients, independent practices and employers.
3. Site-of-care variation
The same service, sometimes from the same physician, can cost dramatically more depending on where it's delivered. Hospital-based care can run as much as 13 times the outpatient price. One example we discussed: $135 at one in-network provider versus $13,560 at another for the exact same infusion drug. Both were in network. That's not a pricing edge case. That's a market that isn't working.
Read the full episode transcript
Why do network pricing problems persist?
Cut off one head and the body grows it back. The body is two things.
The first is opacity. For decades, plan sponsors were contractually blocked from seeing their own claims and rates. Gag clauses weren't banned until the Consolidated Appropriations Act of 2021. The second is misaligned incentives. When intermediaries earn a percentage of spend, higher prices aren't a problem for them. As Stacey frequently says, “Where there's mystery, there's margin.”
None of this means employers can simply walk away from networks. Members need coverage and access, and disruption has real consequences for real people. In the short term, most plans are going to keep a network. The opportunity is in what you do around the edges.
How can employers reduce healthcare costs beyond network discounts?
1. Evaluate networks with real prices and your own claims
If you're considering a network change, start with actual negotiated rates, not advertised discounts, and model them against your own claims file. How does each option perform for your members, your providers and your geography? Four years into hospital price transparency, the data is still messy and needs significant cleanup, but it's there. A switch can be justified. Just know that as transparency pushes prices toward the mean, network shopping alone won't bend the trend for long.
2. Contract directly where it makes sense
Direct primary care and advanced primary care, especially when paired with value-based incentives, change what a primary care practice is rewarded for. Inside a traditional network, preventive work often competes with the economics of specialty care. There's nothing stopping an employer from contracting with a local primary care practice. Centers of excellence for MSK, GI and cancer are a proven model that many employers still aren't using.
3. Tier by site of care, not just by provider
Provider tiering has been around a long time. What's harder, and more valuable, is tiering that reflects where care happens. Given the cost differences above, this is where real savings sit. It requires member engagement and a reliable data pipeline that shows what care actually costs at each site.
4. Pay for episodes, not line items
This is the part I'm most excited about. Instead of paying claim by claim, you can define episodes of care, potentially 150 or more, and attach a single price and a single member copay to each. Variable copay designs can steer members toward providers that deliver higher quality, lower cost or both, and you can tier on episodes without depending on a single network. Quality is hard to measure for one procedure. It becomes measurable across an episode. And every plan sponsor asking for a bundle price moves providers toward offering one. It's a two-sided market, and demand matters.
These approaches work best together. Each one also weakens the three problems above: when you know the price, the quality you're paying for and what you were billed, you can compare them.
What this means for brokers and consultants
The advisor's role is shifting from shopping for the biggest network discount to orchestrating a plan. That means knowing what care actually costs, understanding each employer's priorities and connecting them to solutions that deliver.
That's where Handl focuses. Data for its own sake doesn't change a plan. The data has to connect what it says you should do with how you'll actually do it, from design through monitoring. We work with brokers, benefits consultants, self-funded employers and TPAs to turn pricing intelligence into plan designs a TPA or ASO can implement.
If you want to put some of these ideas in place but aren't sure you have the data infrastructure to support them, get in touch.
