What you need to know about provider networks

When you signed up for your health plan, you probably heard the term provider network. But what does that really mean — and why should you care?

The short answer: Using in-network vs. out-of-network care is one of the easiest ways to hold your health care costs down.

What’s a provider network?

Think of it as your health plan’s team of preferred doctors, hospitals, pharmacies, labs and other health care professionals. These providers have an agreement with your plan that says they’ll take care of you at special, discounted rates.

How staying in-network benefits you

Here’s the big benefit: When you use a network provider, you pay less in two important ways:

1. Your share of the cost — whether a deductible, copay or coinsurance — is less. For example, you would pay a $500 deductible plus 15% for an in-network hospital stay. Out-of-network, you would pay an $800 deductible plus 40%.

2. The cost that your share is based on is lower because, as stated above, in-network providers have agreed to discount their rates.

But there are other benefits: Network providers handle paperwork and file claims for you. And you’re less likely to have surprise bills or gaps in coverage.

Go outside the network and you’ll not only pay more, but you may also have to pay up front, file your own claims and wait for reimbursement.

Why providers join networks

You might wonder why a provider would agree to discounted rates. By joining a network:

• They get access to more patients, which allows them to grow their practice

• They know they’ll get paid reliably from the insurance company

• They have access to programs that help patients achieve better outcomes

How providers are credentialed

Before any doctor, hospital or clinic becomes part of the network, your health plan does something called credentialing. This is basically a background check to make sure the provider meets high standards for safety and quality. It usually involves:

• Verifying licenses, certifications and training

• Checking education, work history and references

• Reviewing past performance, malpractice history or disciplinary actions

In short, your plan works behind the scenes to ensure its network providers are qualified and trustworthy.

Centers of Excellence explained

While credentialing ensures every provider in a network meets high standards, some hospitals and programs earn an extra designation: Centers of Excellence. These hospitals, clinics or programs have been recognized for delivering especially high-quality care for certain complex or specialized conditions — like alcohol or drug addiction, cancer, organ transplants or heart surgery.

It’s worth noting that earning a Center of Excellence designation is a rigorous, time-intensive process, so if a facility doesn’t have that label, it doesn’t mean the care is lower quality.

The bottom line

Sometimes going out-of-network is appropriate. But it’s vital you do your research — especially if you found the provider through advertising or solicitation.  Why? Some out-of-network facilities — particularly addiction treatment centers — use deceptive practices to get around lower reimbursement rates. They may also claim very high success rates that are exaggerated, misleading or just plain false. That can mean you end up paying much more than you expect and/or receive poor quality care.

When you use in-network providers, you’ll have peace of mind knowing your health plan has already done the legwork to make sure providers meet high standards.