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What is a Closed Network Plan

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Taking a health insurance plan is almost a necessity. However, choosing a plan that suits your budget and requirement takes a decent amount of market research. So, when you look for a health insurance plan, you may come across several options offered by insurance companies that make it crucial for you to understand the terms related to it. The article will primarily focus on the Closed Network plan while talking about the network plan and the most common types of health insurance plans. Read on to know more.  

What is a Network Plan?

When a large group or a network of hospitals and health care providers agree to the terms & conditions of a health insurance plan to provide medical services to the plan’s members, is called a Network plan. 

A network plan is also called a medical network plan which is designed for the patients so that they can receive the necessary treatment from their primary health care provider (PCP) and take the maximum benefit of their health insurance plan.  

What is a Closed Network Plan?

A Closed Network plan is the one when hospitals or medical services providers are not allowed to join an already existing Network plan of healthcare providers. In simple words, a plan that no longer accepts new healthcare providers to provide medical services to its members is a Closed Network plan

A closed network plan allows the healthcare providers to solely focus on patients’ care as they need not worry about the ever increasing list of providers creating competition. Also, a closed network plan reduces costs for the insurance companies as patients may not get a nearby in-network local provider within time in case of emergency, thus discouraging the use of in-network providers. 

This is probably the reason why a closed network plan is generally inefficient in providing an in-network healthcare provider locally. A larger network increases the quality of services as it makes sure that local in-network providers are available for the patients whenever required.  

Types of common Insurance Plans offered

The health plans (Bronze, Silver, Gold, and Platinum) are organized by the level of benefits they offer. These plans differ in terms of deductibles, out-of-pocket costs, etc. Once you select the type of plan, you can decide whether you wish to go for a closed network plan or not! You may find the insurance companies offering the following four common types of plans:

  • Health maintenance organizations (HMOs) – This type of insurance plan allows you to receive treatment from doctors who either have a contract with HMO or work for them. Generally, it doesn’t encourage you to go to out-of-network doctors and other health care providers except in an emergency. Also, you may need to work or live in the plan’s service area to be eligible for coverage. The plans usually provide integrated care while focusing on prevention and wellness.
  • Preferred provider organizations (PPOs) – A PPO plan is the one that allows you to pay less if you use in-network health care providers. If you go to an out-of-network provider without a referral, it will come with an additional cost.
  • Exclusive provider organizations (EPOs) – An EPO plan allows you to get coverage only if you visit in-network doctors, specialists, or hospitals (except in an emergency).
  • Point-of-service (POS) plans – It’s quite similar to PPOs. A POS plan is easy on the pocket as you pay less if using in-network doctors, hospitals, and other health care providers. The big difference here is that you need to get a referral from your primary health care doctor/provider in order to see a specialist.

Benefits of Closed Network Plan for Providers and Insurance Companies

  1. Less competition – A closed network plan offers less competition to the on board doctors, specialists, hospitals, and other medical services providers as new providers cannot join the network. 
  2. Steady revenue – As new health care providers cannot join the network and the plan members and new members opting for a closed network plan are allowed to use only in-network health care providers, the network is likely to offer a steady revenue to its on board hospitals, specialists, and doctors. 
  3. Decreased costs – The insurance companies offering a closed network for their health insurance plans are likely to have decreased costs because a closed network may not be able to offer local medical services providers everywhere to its members discouraging the use of in-network providers’ services. Thus, resulting in decreased costs for the insurance companies.