Tiered Networks Reward Health Systems That Move First

Employers, brokers, and payers are building plans that rank providers by episode and steer members with copays. A health system that measures its own episodes first can protect its position and bring its regional payers a new product to build together.

Environment

For a decade, employers met rising health costs by moving more of the bill to their workers through high-deductible plans and larger out-of-pocket costs, and they still do. The average family premium for employer coverage reached $28,303 in 2026, up 5% in a year, and workers now pay $7,471 of it, up 9% from 2025. Among large employers responding to projected cost increases, 44% raised the workers' share of the premium. A second response is growing alongside it: 7% switched to a plan with a tiered or narrower network, and employers also reported trying direct contracting with providers (KFF).

In an October episode of Hospitalogy's Claims Denied podcast, Ahmed Marmoush, co-founder and CEO of Handl Health, argued that cost shifting has run its course and employers are ready to restructure how they buy care (Claims Denied). The KFF numbers point to a more gradual path, with new designs added on top of cost shifting. Handl sells benefits analytics, and its business splits evenly between the brokers who design plans and the carriers and third-party administrators that run them, so he has a stake in the trend he describes. The company moved upstream to brokers after its consumer shopping tool stalled because member behavior did not move, and more than 800 of them now use its platform (Hospitalogy).

His preferred design is a variable copay plan. The network stays broad, but each choice carries a price signal for the member, and care is priced by the event a person recognizes, such as a hip replacement or a birth. Providers are ranked on an index with three parts: cost per unit and per episode, quality measures down to the specialty, and appropriateness, which asks whether the surgery came before the physical therapy that should have come first. In his words, "You tier to understand the value, you steer to create the incentives." The design is hard to run today. Tiering is heavily regulated, some older provider contracts prohibit it outright, and many carriers' claims systems, built around procedure codes, cannot yet administer an episode-based copay schedule.

Tiered and reference-priced plans have been in market for more than a decade, with mixed results. When CalPERS set a $30,000 reference price for hip and knee replacement in 2011 across its PPO plan of about 450,000 members, first-year surgical volume rose 21% at lower-priced facilities and fell 34% at higher-priced ones, and some high-priced hospitals lowered their prices (Robinson and Brown, Health Affairs; Berkeley). Earlier research on tiered physician plans found bottom-tier specialists lost 11% to 12% of their new-patient share (Debbarma and Dowd, Health Affairs Scholar). A study of the Massachusetts Group Insurance Commission's tiered physician networks, eight to twelve years after launch, found no link between a specialist's tier and the share of new patients that specialist attracted (Prager et al., JAMA Network Open). For variable copay plans already in market, such as UnitedHealthcare's Surest, which shows members a dollar copay by provider and service before care, the main evidence so far is a plan-commissioned Aon analysis reporting total cost of care 7.5% to 7.7% below a matched comparison group, measured on allowed claims (Debbarma and Dowd). In these studies, a large price difference on a planned episode moved volume, and modest copay gaps on specialist visits faded over time.

Impact

For a health system, tier and steer moves the decision about commercial volume into plan designs that employers, brokers, and payers set before a patient needs care. A system placed in a lower tier for joint replacement or maternity care can lose volume in those service lines with no change in its quality or its reputation, because the tier is set in a benefits review the system may never see. The exposure is greatest where the evidence says steering works: planned episodes such as joint replacement, maternity, and advanced imaging, where patients have time to compare and the price gap is large. Emergencies carry little exposure, and neither do members past their out-of-pocket maximum, who face no copay difference at all.

Referral relationships decide much of how that exposure plays out, because patients choose when a physician refers them, a surgeon recommends a procedure, or a navigator suggests a site. In survey research cited in the Health Affairs Scholar review, clinician recommendations outweighed copay differences below roughly $300 (Debbarma and Dowd). A system's employed physicians, referral patterns, and scheduling access therefore decide how much volume holds through a tier change.

Most systems would see a tier-driven loss late, because they organize analysis by payer and referral source. Assad Siddiqi, founder of Siddiqi Advisory and a former health system senior finance executive and physician organization CFO, described the gap: "A health system may know which physicians refer patients and which insurers pay the bills, yet still lack a clear view of the employers whose health plan design decisions could influence that volume."

The ranking also scores the whole episode. Systems with ambulatory sites, care pathways, and primary care capacity may score better than their unit prices suggest, because episode cost reflects site of care, length of stay, and post-acute use. The same index can count spending the system neither fully sees nor directly controls: a system may perform the hip replacement while rehabilitation, follow-up visits, or a readmission happen elsewhere, and depending on how the ranking defines the episode, all of it can count toward the system's score.

Imperative

Health system finance and contracting leaders should measure cost, quality, and contribution for their largest commercial episodes by plan and employer before brokers rank them.

Insight

The deeper question is who decides where care goes when most patients do not shop on price. Incentive design is the useful lens: ask who pays, who decides, and who benefits. In a tier-and-steer plan, the employer pays, the broker and the payer set the terms, and the copay and the referring physician steer the member. Most health system growth plans still aim at the member through brand, access, and marketing. The question for leadership is whether the system can see its own business the way the people now routing its patients see it: by episode, by plan, and by employer.

Most systems already have much of that view in service-line reporting. The added work is to stratify it more deliberately, by episode, payer, plan, site of care, and, where reliable employer-to-coverage data exist, employer group, and to connect each view to internal cost and contribution. That view shows which employers account for meaningful commercial volume and contribution, who designs their benefits, and what happens to that volume if their preferred providers change.

Initiative

The same evidence lets a system start the conversation on its own terms. Handl's broker clients report that their carriers cannot yet administer an episode-based, provider-tiered copay plan, so a regional payer that wants to offer one to local employers will need provider partners with credible episode data. A system that has measured its largest commercial episodes can bring that partnership to the payer first: a defined episode for joint replacement or maternity, a price and quality commitment the system will stand behind, and a plan for the rehabilitation and follow-up care it coordinates with others. The payer gets a new product to sell to employers, and the system's episodes sit in the tier the plan steers members toward.

Moving first makes the system a co-designer of the benefit. Brokers meet a provider that arrives with its own numbers, and Handl says it welcomes dialogue with providers about its methodology and how to move tiers. A large local employer can take the same package as a direct contract, an approach employers in KFF's survey reported trying. The work also strengthens annual payer negotiations, population health, operations, and decisions about where to invest, so it pays off even in markets where tiering arrives slowly.

This is the work Nexcurve does with health systems. We help leadership teams build the evidence, turn it into a marketable value proposition, and take it to payers and employers as a partnership opportunity. Our advisors have sat on both sides of the table, inside health systems and inside payers, and we always represent the health system.

Questions for your leadership team

• Which employers account for our largest share of commercial volume and contribution, and who designs their benefits?
• For our largest commercial episodes, how much of the episode's cost happens in settings we can see and influence, and where would we need better data or coordination?
• Which regional payer would value an episode-level partnership with us, and which episode would we propose first?

Next step

Start with three to five commercial episodes where patients plan their care, such as joint replacement, maternity, or advanced imaging, and a data readiness review. Can you link each episode to plan, employer group, and internal cost today? The answer sets a credible scope and timeline, and the first finished episode gives you something new to take to your regional payers.