I Have a Dream… of a Post-Network World

The carrier gangsters have spent decades making sure you can't leave. Here's how that ends.

I have a dream of a post-network world.

Not in a think tank’s this-will-never-happen-but-we’ll-still-write-white-papers-about-it sense. I mean a real world in which employers - the ones running the health plans that cover most Americans - can buy health care the way they buy everything else: by comparing prices, negotiating directly, and refusing to overpay when a seller is out of line.

Because right now, that’s obviously not how this market functions.

Carrier networks operate less like marketplaces and more like Hotel California.

Employers are allowed to choose between networks, but they are not meaningfully allowed to operate outside of them. When they try, they discover very quickly that the system has been engineered to make that choice cartoonishly painful.

Once you’ve chosen a network, it operates like a plantation.

Employers - the ones funding the entire enterprise - are held hostage to that network. This isn’t an accident - it’s the result of specific contractual hostage-taking, honed over years of dominating the health care landscape.

But I’m increasingly running into people building the underground railroad, allowing a few, obscure, invite-only escape routes. Some have been doing this for a couple years. Some are just starting. The tipping point isn’t even showing yet, but it’s on its way. I’m starting to partner with these insurgents, and so are others.

At this point, we’re all just hobbits taking on Mordor (but you know how that story ends).

To understand how we get out, let’s walk through how the system works to trap us in the first place.

[Industry people: Yes, we’re doing the 101. Feel free to skip ahead.]

Every employer-sponsored health plan has three core functions (even if they are bundled together in practice for most):

The first is plan administration. Someone has to receive the bills (“claims”) from doctors, hospitals, or pharmacies (we’re going to call them “providers” in this article even though that word makes them want to burn me at the stake, I know), figure out if the claims are for covered services, confirm the patient is actually enrolled on the plan, calculate what they’ve already paid against a deductible, and write the check to the provider. Someone also has to keep records of every transaction, pay the other vendors on the plan, and send the client regular reports. The companies that do this are third party administrators (TPAs) - and they can be either carriers themselves or they can be separate companies (“indie TPAs”).

The second is risk assumption. In other words, whose bank account is the TPA reaching into to write those checks to providers? For plans in the individual and small group market, the TPA itself is bearing risk - this is called a “fully-insured plan,” meaning the TPA is the true owner of the plan, it’s assuming your risk. If you cost them more than the premiums you pay, they lose and you win. I mean, until they raise rates for everyone next year, but you get the point. That’s why these markets are the most expensive - those insurance companies aren’t going to lose money on you - they’re going to build a huge buffer against that in the form of overpriced premiums. These plans are regulated partly by the ACA as well as state insurance commissioners.

Bigger companies (though they can be as small as 50 or 100 employees) usually choose a different model, one where the employer itself bears all or most of the risk. This is why this type of plan is called a “self-funded” plan - not because you the patient are funding things, but because the employer is funding its own risk. When you pay your premiums with payroll deductions, you’re actually paying them to your employer’s account, and your employer pays premiums each month to itself in that same account. Then the TPA writes checks to providers out of that account. Most employers that are smaller than 5,000 or so will actually buy some stoploss reinsurance for themselves, just in case of a really bad year or a particularly high-cost patient. These plans are regulated federally, by the Department of Labor (and a little bit by the ACA).

The third is pricing - or more accurately, re-pricing. Of the bills from doctors, hospitals, and pharmacies, to be specific. For some sick reason, health care is billed at a sticker price that is inflated far above what would be a reasonable cost-plus-some-profit rate. You need a way to access discounts off that list price, as a result. A network is nothing more than a set of contracts with providers for a certain contracted rate (usually, though not always, below the sticker price). There are other ways to get discounts, which we’ll discuss later.

So the claim goes FIRST to the network, which applies its contract with the provider, and sends the contracted rate, along with the claim, to the TPA for processing and payment. The big insurance companies all have their own network. So for most health plans, all this happens under one roof, either because the plan is fully-insured and the carrier is doing all three core functions, or because the plan is self-funded, and hires the carrier to both administer the plan as the TPA and to provide its network (even though that employer is paying all its own claims).

An employer can also fire the carrier as the TPA, and hire an indie TPA to do the plan administration, while still keeping a network, by renting a carrier’s network. Indie TPAs partner with a few carriers to offer their networks to these employer clients. Most clients still want a network on their plan, even if they don’t want a carrier administering their plan. So indie TPAs contract with the carrier networks as a distributor of sorts for their network. The employer then signs a network access agreement when it hires the TPA, essentially renting the network.

Again, networks are simply a set of contracts between the carrier and providers. So doctors, hospitals and pharmacies all have their own contracts with networks, if they “take insurance.” That’s what makes them “in-network.” Some providers couldn’t come to agreeable terms in a contract or they didn’t even want to try, and those are considered out-of-network. That means that there’s no agreement as to how much they get paid for members of that plan.

So, regardless of how the pieces are arranged, almost every employer in the country ends up in the same position: dependent on a carrier network for access to care.

And once you are inside that network, you are not just getting a price list. You are entering into a set of contractual obligations that govern how care can be purchased, and, critically, what alternatives are off-limits.

Most employers do not realize how restrictive those obligations are until they try to step outside them.

The Obvious Question: Why Not Just Eliminate Networks?

Some employers have asked that question. A small number have gone further and actually done it. This is what is commonly referred to as reference-based pricing (RBP) plans.

Instead of relying on a carrier network, an RBP plan sets its own allowable reimbursement rate for providers, typically indexed to some percent of Medicare. As we’ve discussed in my post about how not to get financially screwed by the medical system, anything up to about 150 percent of the Medicare rate is considered pretty good. 150-200 percent is fair. 200-250 is iffy, depending on the type of service. 250 percent and above is rapey (it’s also the nationwide average carrier rate, which is precisely why RBP plans exist - to pay less than they would with a carrier network). On an RBP plan, patients can, in theory, go to any provider, and the plan pays a defined amount, usually somewhere between 125-180 percent of Medicare rates.

At first glance, this looks like the cleanest possible solution. You remove the middleman. You define a rational price. You let the market work.

In practice, it introduces a set of tradeoffs that are often minimized in sales pitches and only fully understood once a plan is live. I have built and run this type of plan, so I’m not throwing stones, just being honest.

The first problem an RBP plan faces and must find a solution for is balance billing. By definition, there’s no contract/network. So, providers have not agreed to your Medicare-based rate (“plan allowable”), and, absent a contract, they retain the right to bill the patient for the difference between what the plan pays and their billed charges. There are vendors who specialize in negotiating those balances down after the fact, often landing somewhere above the plan’s allowable but below commercial rates. That process can work when your vendor is good, but it is reactive, and it puts the patient in the middle of a negotiation they did not initiate, sometimes even being sent to collections while the parties in the background are negotiating (or playing hardball) - sometimes for months and months.

That is the visible problem.

The more serious problem is one step earlier in the process, and it is less discussed because it is harder to solve: patients often can’t get the appointment in the first place.

I learned this the hard way with a small group of Catholic nuns. I’ve mentioned them in previous posts. They were so desperately tired of being bankrupted by Blue Cross, they begged me for a solution that saved significantly. So we went with my first (and last) RBP plan.

Recently, a desperately sick sister needed to see a specialist at NYU-Langone Medical Center. Historically, that system had seen patients from this plan without issue. But something shifted a year ago or so - subtle changes in how they describe on their website about accepted insurance coverage - a tightening of language that signaled a change in posture.

When Sister called to schedule, she was told they did not take her plan. She tried to explain, correctly, that she did not have a network and could go anywhere. The response did not change. They would not schedule her.

The only option they offered was for her to pay cash upfront.

That might sound like a workable fallback until you remember who we are talking about. She had no income. She did not have a bank account. “Pay upfront” was not a logistical inconvenience; it was a hard stop.

We tried to engineer around it. Could the TPA send funds in advance? Yes, but only to the sister, they can’t pay a hospital for care not yet rendered. But she didn’t have a bank account, couldn’t receive a check. Could the TPA just pay with a credit card and be reimbursed by the plan later? This TPA - like most - wasn’t set up for that. Typically, auditors frown on payments for services not yet rendered, as well as on TPA transfers to themselves from client bank accounts.

As I do when I’m in a pickle with a hospital, I called my dear friend who is an executive with the hospital trade group. She put me in touch with an NYU executive. He didn’t understand what an RBP plan was, and kept suggesting that we were a health care sharing ministry or some other type of non-plan. In other words, a hospital executive was flummoxed in exactly the same way that most front-desk or scheduling staff are when patients call and try to explain their RBP plans.

She needed care. The system would not let her access it. The sisters scrambled to come up with the cash - which they raised from benefactors - and lived without it somehow until the plan could reimburse them.

This is the tradeoff: reference-based pricing plans can be extremely inexpensive, but they shift friction onto the patient in ways that are not always tolerable.

“Cheap” is no help if you can’t get in the door.

The Hospitals Aren’t Confused.

Hospitals understand what a threat RBP plans are to them. They are making calculated decisions.

They understand that if they create enough friction - if patients encounter enough resistance, enough uncertainty, enough delay - those pressures will flow back to the employers, which, after all, are running plans that cover their own families. All it takes is one high-friction experience with the CEO’s wife - a delayed appointment, a collections notice, an aggravated doctor - and the calculus changes.

The employer reinstates a carrier network. The broker who recommended the alternative is replaced.

And the conclusion, reinforced through experience, is that the system cannot be changed.

A particularly notorious case of this pattern was when University of Pittsburgh (UPMC) - the health system that monopolizes half of Pennsylvania - went gangster on its own community. A bunch of public sector health plans - the local school system and various municipalities - adopted the RBP model to try to save on costs. UPMC refused to schedule any patient covered by those plans. None of them lasted more than two years before giving up and buying into the local Blue network or UPMC’s own (overpriced) plan offering. UPMC became a hero and role model for other hospital systems across the country. NYU-Langone has apparently followed their lead, icing out the Catholic nuns’ plan that they had been taking for years.

This playbook makes it clear: try to pay less by dropping networks that pay confiscatory rates to hospitals and you’ll pay less alright - by not being able to get care at all. The hospitals are in league with the networks against their own communities.

But there are early signs that the ground is shifting.

Glitch in the matrix…

Regulatory pressure has begun to expose pricing in ways that were previously not possible. New requirements were just passed by Congress on PBMs, but they also threw in a little gem that effectively applied them to TPAs, which would force transparent disclosure from all plan vendors about their rapey rates and conflicts of interest and secret revenue streams they’ve been hiding from their client employers. The Department of Labor (DOL), which oversees larger employer plans, doubled down on this concept, essentially saying that these schemes are illegal transactions that no employer is allowed to tolerate. It’s a one-two punch - first you have to disclose your business model. Then, your clients aren’t allowed to have a plan vendor with that kind of business model. I wrote about these fantastic policy innovations here. I called them a nuclear bomb on the status quo.

Equally encouraging, the Department of Justice (DOJ) has begun to pursue antitrust enforcement actions, targeting provider-side contracting practices. Cases like the one against OhioHealth (which I wrote about here), and a similar case that just dropped on New York Presbyterian, one of the truest Bond villains in the country, focus on provisions that require plans to include entire systems, regardless of cost or quality variation between facilities in that system, as a condition of access to any of their network rates.

Those provisions matter. Removing them would create more flexibility on the provider side.

I appreciate DOJ taking action. I tried to get them to pay attention to this stuff when I worked in the White House, and they said it was FTC’s job, and FTC said it was DOJ’s job, and neither of them did their own job. But even if these contract provisions were ruled illegal, we would still be a long way from the Holy Grail of a post-network world.

It’s not that better options don’t exist that could hasten us toward that future. It’s that they are contractually suppressed.

Let’s walk through exactly how carrier agreements govern payment behavior, why even independent TPAs are constrained in ways that disadvantage innovation-minded employers, and what I believe are illegal network contract provisions preventing the emergence of a true price-based market, strangling it before it can breathe.

Then I’ll describe why the three most popular work-arounds - reference-based pricing, direct contracting, and cash pay - all run into structural limits, even when executed well.

And finally, because I’m not in the business of handing you a burning building and walking away, I’ll lay out what would actually have to change, at the policy and enforcement level, for my dream of a post-network world to become reality.

If you’re trying to build something different, advising someone who is, or trying to regulate this market in any meaningful way - you need what’s behind this paywall more than you need whatever you’re doing next.

At a surface level, the problem looks like pricing. Employers are paying too much, and the obvious response is to look for cheaper alternatives: reference-based pricing, direct contracting, cash pay strategies, or some combination of the three.

What it Takes for an RBP Plan to Work

I already described the way hospitals and networks conspire to make RBP plans unworkable. While it’s theoretically possible to overcome these challenges and operate a successful RBP plan, it requires some pretty exceptional conditions to be met:

1. Localized employer in a non-gangster market. The employer plan sponsor must be localized in a market (not spread out all over multiple markets or nationwide) where there are multiple hospital systems, at least one of which chooses not to deploy the gangster playbook, and that has enough geographical spread and clinical quality to give most employees access to hospital care without unreasonable travel burden. That means they have quality care for admissions arising from acute cardiology, neurology, oncology, orthopedics, gastroenterology and so forth. They also need to be able to treat kids with acute specialty needs (including NICU/PICU), their labor and delivery care should be high-quality (good luck with that, LOL), their ER should be able to handle almost anything without transfer. If the employer’s workforce is spread out all over the place, many of them will be in markets dominated by gangsters.

2. Competent navigation vendor. You have a navigation vendor that is able to competently navigate members to providers who will accept the plan. That means the member has to contact the vendor, describe the need, and then the vendor has to contact an appropriate provider, and work with the provider to ensure that the plan will be accepted. That often requires getting a call back from the office manager or practice leadership, or hospital/facility management, which can take days (or weeks), teaching them about the plan, gauging their willingness, and then negotiating a rate, or a single case agreement just for that one patient, if they won’t accept the plan’s allowable rate more generally. Then the navigator has to let the patient know it’s ok to schedule. But often, the practice management that you worked things out with has not adequately communicated to the front desk schedulers when the patient calls, and this requires another go-round of communication from the navigators.

   In my experience, I have found not one vendor who is able to do this reliably well most of the time. I have worked with several myself for my little group of Catholic nuns. And I have surveyed every benefits advisor I can find who is running RBP plans, and they all complain too. Lots of good people working very hard, but even when they care as much as I do, many, many, many provider offices just won’t come around and play ball in a timely enough way for the patient’s need. The best advisors basically in-house this process and hire their own navigation staff, because it always seems like the vendor just doesn’t care about your clients the way you do. That can work better, but without other tools, like cash-pay options (more on this later), it’s still high-friction.

3. Patient education about the plan. All of them. That’s hard because, at best, the employees come to the open enrollment meetings where you do your best education, not their spouses and adult children - even if they’re invited. And even if you do additional education or contacts throughout the year, there’s only so much you can pack into a quick video, an email or flyer on the bulletin board.

   Patients aren’t really paying much attention until they need care. And then, they almost always have an idea of where they’d like to go for care and they bring that preference to the navigators, who will usually start trying to get that provider to accept the plan. Often these are the flagship hospitals or bougie practices in town, and they have zero incentive to play ball. So the navigators waste a lot of time trying to give the patient what they request before going back to them with alternate provider suggestions. Both the delay as well as the failure to get their preferred provider annoy patients. A lot. To them, it seems like normal, high-quality doctors that everyone else goes to won’t take their plan, so the plan must be cheap and crappy, and they get angry with their employer.

4. A balance billing vendor who is impeccable - and patients who are educated that they might get a balance bill, which they need to send to the plan immediately. Once they do, that vendor has to respond timely with outreach to the provider, and competently negotiate with them to an acceptable rate. Many providers make it intentionally impossible to talk to the right person about negotiating a bill - especially hospitals. At smaller practices, billing staff may not have the authority to just negotiate a bill downward and they refer you to the owners. So this process can go on for months, even years. The billing vendor has to have lawyers on hand as well, because the process gets nasty when the collections notices start coming. Most plans don’t let it get to that, often giving in and paying the occasional way-overpriced bill as the cost of doing business, trusting in the plan design to save enough elsewhere. But doctors who aren’t getting their bills fully paid will often cancel subsequent appointments for the patient or other patients on the plan and refuse to see them anymore or until the dispute is resolved. More friction that leads to angry calls to HR. I will say, however, that there are a few vendors out there who handle this problem reasonably well, so this challenge can usually be overcome.

5. A solution to reduce the traffic to specialists and acute care. This is usually accomplished by adding concierge primary care, preferably with a behavioral health solution included or bolted on as well. Direct primary care (membership-based with a monthly fee), provided free to patients, goes a long way here, since up to 80-90 percent of health care needs can be managed by a high-quality primary care doctor who is paid to keep people healthy and out of the system. The behavioral health piece is also essential because you’d be absolutely shocked at how much these costs drive overall spend these days. We’re all falling apart (see previous posts about our un-human lives).

Rarely are these ideal conditions all in place. Even employers who start out gung-ho get demoralized by all the friction, and have to continually remind their grumbling workforce about the savings generated by the plan and how they’re being used to lower premiums or cost-sharing, or increase wages, and so forth. There’s still a ton of friction around scheduling that requires dependence on navigation and negotiation vendors that must be absolute unicorns in order to work seamlessly almost all the time. Patients have to be educated about how to explain their plan to providers and why we’re doing all this. This education requires explaining a lot about health care to members who don’t really care. (You DO care, and it’s already taken me over 2,000 words to get us here.)

The RBP plans that last - meaning that the employers don’t give up from all the toil and trouble - eventually convert into something else over time: a custom network built on direct contracts. Most successful employers using this model make them sustainable by asking providers who agree to take the plan for a given patient if they’d be willing to paper up a direct contract for the whole group. Over time, this set of direct contracts turns into a custom network that requires less and less intense navigation work and education of patients. Patients get used to being sent to a certain set of providers. This promised land comes faster once a hospital system in the market agrees to a direct contract. That’s when the custom network starts to feel comprehensive to patients.

When this works, we call it a “community-owned health plan” - and the benefits advisors building these plans start offering this custom network and the plan design that steers patients to the custom network (usually at no or very low cost) to other employers in the community. Ideally, these plans bake in high-quality direct primary care as a way to limit the need for specialty and acute care as much as possible.

So yeah, RBP plans can work as transitional vehicles into community-owned health plans, but they are unicorns that require every almost-impossible condition above to be in place.

This is not a viable solution for the whole country.

Why Not Use a Network as a Backup Solution when a Provider Won’t Play Ball?

To a rational human, it might seem that the obvious solution to all the RBP challenges described above is to have claims sent from providers to the indie TPA first. Then, the TPA tries to get the provider to accept the RBP rate. But if that doesn’t work, then the TPA could send the claim to the network to apply its contracted rate with that provider. RBP is Plan A. Network is Plan B.

But health care doesn’t allow rational humans to prevail when revenue is on the line. Now that we’re past our earlier 101 on networks and discounts, it’s time to talk about how network contracts really work to box out rational alternatives.

Networks function through contracts not just with health care providers, but also with the plan sponsors, and their vendors. These contracts sit in three places simultaneously: between networks and providers, between networks and TPAs (if the network is not the same company as the TPA, which in the vast majority of cases, they are), and between networks (directly or indirectly) and plan sponsors.

These are not independent contractual relationships, negotiated separately. They reinforce each other in ways that make it extremely difficult for any one party to deviate without triggering consequences elsewhere.

Start with the most visible network signal: the logo on the ID card. Most of us think this is just branding - but it’s actually a signal to the provider about where to send the claim and what options are off the table before the conversation even begins. If a provider is contracted with that carrier, the presence of the logo tells them that they are bound by their agreement with the carrier, which typically prohibits them from bypassing the network to accept a separate arrangement with the patient or the employer. They can’t simply decide to accept a cash payment in lieu of submitting a claim to the carrier, even if that cash payment would be faster, cleaner, and economically rational. The contract forbids it.

That same signal constrains the TPA, even if the TPA is independent (meaning the TPA is not the carrier/network) and the TPA is merely contracted with the carrier to offer options to employer clients to rent the carrier’s network. If the TPA has a network access agreement with the carrier, it is obligated to process claims in accordance with the carrier’s negotiated rates when a participating provider is involved. If the TPA attempts to deviate - by paying a different amount that the employer and provider have agreed to outside the network - it risks losing access to that network entirely. And losing access to the network is not a minor inconvenience for a TPA; it is an existential threat, because many of its clients insist on renting a carrier network. They don’t want an RBP/no-network plan, and they fire the TPA if they can’t rent a network for their plan. A good TPA I once worked with lost its main network contract because of these issues, and it declared bankruptcy a couple years later.

The plan sponsor is not exempt from these constraints. Even when using an independent TPA and merely renting network access, the employer is contractually bound to honor the carrier’s rates with providers. In some cases, the contract language goes even further, explicitly acknowledging that the contracted rate may exceed the sticker price that’s billed, and still requiring the plan to pay the higher contracted rate. I flat-out refused and got lawyers involved when a carrier rental contract came at my client with that language, and was told that Cigna would walk away - it was non-negotiable.

Similarly, the plan is often required to structure its benefits in a way that steers members toward participating providers and reinforces the network’s primacy. Some network access agreements allow for exceptions to this if you give them the list of direct contracts you may already have in place, or vendors for this or that type of service - but they have to approve them. When I’ve given them a vendor that is too big (like, say, for all imaging services), they have rejected those “exceptions” to their agreement, and that’s final.

Taken together, these provisions create a closed loop. The provider cannot accept an alternative payment. The TPA cannot facilitate one. The employer cannot direct one. And the carrier sits in the middle, enforcing the rules that keep all three aligned with the carrier’s interests.

Many times, I’ve asked the network: “you get paid your monthly access fee whether my client uses your network or not, so why do you care if we go around you?”

The answer: they recognize how threatened their business model is by allowing plan sponsors off the plantation, even a small percentage. The more that happens, the more employers and indie TPAs start building the underground railroad to a post-network world. And they can’t have that.

That is not a market. It’s the mafia.

Blue Cross, United, Cigna, Aetna, Humana. Or as we call them in the biz, the “BUCAHs.”

Why You Cannot “Partially Escape” the Network

Employers don’t lack ideas or even willingness to embrace change. The system permits no incremental deviation. You can be inside the network, or you can attempt to operate entirely outside of it, but the middle ground - the place where you combine strategies and gradually build a better model - is where the contracts exert the most pressure.

This is why reference-based pricing, direct contracting, and cash pay all encounter similar limits, even though they appear, on the surface, to be very different approaches. Each one represents an attempt to create an alternative pathway for payment. Each one runs into constraints that were designed to keep everyone on the plantation.

It is also why the idea that employers can simply “fire the network” is misleading. Technically, they can. Practically, doing so exposes them to all of the access and operational challenges described earlier, without giving them the tools they would need to solve those challenges at scale. The system is designed so that leaving entirely is painful, but staying partially is prohibited.

You are allowed to exit. You are not allowed to compete.

Why Direct Contracting Is Not a Complete Solution

Direct contracting is often presented as the most promising alternative because it addresses one of the core problems of reference-based pricing: the absence of an agreement with the provider. By negotiating directly, the employer can establish a mutually agreed-upon rate, eliminate balance billing, and create a predictable payment structure.

You knew there was a “but” coming, right?

The first “but” is geographic reality. Employers rarely operate in a single, contained market. Employees travel. They relocate. They vacation, they work remotely. They have college kids all over the country. They live in areas where there may be only one viable provider. Even in a relatively concentrated workforce, the dispersion of care needs across different locations creates an immediate requirement for coverage beyond any single set of contracts. You can’t contract with all the providers in the country. So you’ll need some solution for the providers you don’t have a contract with.

The second “but” is that direct contracting takes time. You can’t just flip a switch and have a custom-built set of directly-contracted providers comprehensive enough to replace a network in a month or two. Even if you targeted one market alone, it would still take a year or more to get all the contracts in place. You need a solution during the transition.

The third “but” is provider willingness. Hospitals, in particular, are not uniformly interested in contracting directly with employers, especially smaller ones. I saw this firsthand when I tried to contract with El Camino Hospital in California, where my little group of nuns had a convent with about 10 sisters. The sisters had previously been going to Sutter Health, a gangster, Bond villain system, and I was looking for an alternative for hospital care. Direct contracting seemed like the best solution.

We did the work. We identified the right hospital executives, stalked them on LinkedIn until they agreed to meet, brought in the TPA and our legal and analytics partner to answer operational and data questions. We approached it seriously.

In the first five minutes of the meeting, they declared that they couldn’t contract with the sisters because their systems were not set up to accommodate a new payer in their scheduling and billing infrastructure. Specifically, they would need to modify the drop-down menus in their IT system.

I offered to pay for a coder. They thought I was joking. I wasn’t - the cost would have been trivial compared to the difference in rates.

They declined.

If a hospital can fill its beds with patients coming through carrier networks at rapey rates, there is no immediate incentive to do the back-office work of accommodating lower rates from a few Catholic nuns.

Direct contracting can work in specific circumstances, particularly where an employer has significant local leverage or can steer a meaningful volume of patients to the hospital in exchange for meaningful discounts. But those circumstances are the exception, not the rule. And even when they exist, they don’t eliminate the need for a broader solution to cover the rest of the system.

Cash Pay: Promising, but Not Yet Scaled

Cash pay introduces a different kind of possibility. In theory, it aligns incentives in a way that bypasses many of the inefficiencies embedded in the traditional claims process. Providers receive payment upfront, in full, without delay. They avoid the administrative cost of billing and collections, as well as the opportunity cost associated with waiting for reimbursement.

In many cases, those cash prices are indeed lower than carrier-negotiated rates.

The difference reflects the removal of billing bureaucracy, chasing patients for deductibles and copays, and the elimination of the opportunity cost of “the float” - the revenue accrued by the carrier due to interest earned on delayed payments to providers (who could have been investing that money themselves if they’d been paid timely).

That is the theory.

Operationally, most TPAs are not yet equipped to facilitate cash payments at the point of service in a way that integrates cleanly with plan administration. They can’t pay cash on behalf of a patient they don’t yet know is going to the doctor - they’re used to paying claims that are submitted after service.

So this requires the intervention of navigators who mediate between the TPA and the patient. Patients have to call the navigator, tell them when their appointment is, and then the navigator facilitates the payment to be made by the TPA - and that’s if the TPA has the capacity set up to even make that kind of payment, which most don’t. What’s more, the patient has to be educated by the navigator not to present their ID card with the carrier logo so that the provider has plausible deniability about his own carrier contract.

Doctors willing to take cash from patients have to do it on the DL.

Even if the TPA does have the ability to pay cash, they may run into a situation where the amount they paid upfront before the visit turns out to be wrong because additional services were offered during the patient visit (like a blood draw or a quick x-ray). They also may struggle to manually generate a corresponding claim record, and ensure that the transaction is captured for audit and reporting purposes.

This is all about to change. Quality companies ARE actively building solutions to overcome these challenges. Cash-pay is happening now, in some limited settings - but it still feels like a workaround, like an underground railroad, hiding ID cards - only with a few willing providers, not all claims - certainly not at scale yet. The partners helping make this happen are few in number right now, but I keep hearing about another one here popping up and another one there. So the logistical or technical barriers to cash pay are being broken down.

Another “but?” Yeah.

More fundamentally, providers have limited incentive to make their cash prices attractive. The self-pay market is relatively small - very few people can afford to pay cash at today’s rates. If providers were to offer materially lower cash prices and make them broadly accessible, they would risk undermining the higher rates they receive through carrier contracts without any corresponding competitive volume acquisition, because all that volume is still on the carrier plantation. As a result, many providers either don’t publish meaningful cash prices or publish figures that are closer to their sticker prices than to the actual discounted amounts they might accept in practice, when asked.

This leads to a situation in which the theoretical advantages of cash pay are real, and being realized in practice by a few unicorns, but the conditions required for those advantages to scale - transparent pricing, operational infrastructure, and provider participation - are not yet fully in place. Most importantly, the anticompetitive contract provisions shackling everyone from scaling this model have not yet been tackled by DOJ and the courts.

Networks are the Biggest Fraud Ever Perpetrated on the American People

Can we just stop for a moment and recognize the spectacular scam that is insurance networks? The whole sales pitch of carriers is that they negotiate better prices on behalf of employers than those employers could obtain on their own.

That is almost NEVER true. Instead, the carriers don’t let employers off the plantation to kick the tires on the pitch.

Hospitals are no less complicit - very few have any interest in arrangements that would expose them to direct price competition.

If employers were free to pay cash where it is cheaper, to contract directly where it is advantageous, and to use networks only as a fallback, someone might notice the truth about the carrier networks’ value prop.

The emperor has no clothes.

Enter DOJ (please)

What emerges from this structure isn’t just inefficiency, but a restriction on the ability of buyers and sellers to transact freely:

• Employers can’t offer to pay a provider less than the carrier rate, even if the provider would accept it, without risking the loss of network access.

• Providers can’t accept a lower price from an employer, even if it would be economically rational, without violating their agreements with the carrier.

• TPAs can’t facilitate alternative payment arrangements without jeopardizing their own contractual relationships.

• Patients can’t pay cash and providers can’t accept it if anyone displays an ID card with a network logo on it.

Each party is constrained, not by market forces, but by contractual provisions that align their behavior in favor of the status quo.

This is, at its core, a restraint on trade.

The Department of Justice has begun to address certain anticompetitive practices in provider contracts, and that is an important step, as I wrote about recently, regarding the OhioHealth lawsuit and a similar lawsuit just filed against Bondiest-of-all-Bond villains, New York Presbyterian. But the provisions that most directly prevent the emergence of a price-sensitive market are the ones that prevent the buyers and sellers of care from doing deals with each other.

Those provisions haven’t yet been the focus of enforcement. Paging DOJ Antitrust Division.

What Would Have to Change

If the goal is to move toward a system in which price competition can actually function, here are some ways government can intervene on behalf of you and me and and our post-network dream:

First, enforcement action should target the specific contract provisions that prevent employers and providers from entering into alternative payment arrangements. It’s not enough to address provider-side consolidation or all-or-nothing contracting if the mechanisms that enforce carrier dominance remain intact.

Second, Congress could outright ban these anticompetitive contract provisions. It’s possible that they’ve already been provided with the legislative text, wink wink. The groundwork for this has been laid in recent legislation, but it wasn’t as explicit as it needs to be.

Third, regulatory agencies, particularly the Department of Labor, could announce that these type of contract provisions are prohibited transactions under ERISA, in the same way they have begun to do with pharmacy benefit managers. The logic is similar: when an intermediary structures transactions in a way that benefits itself at the expense of the plan sponsor, that raises fiduciary concerns.

Now, providers could slow the cash-pay explosion by simply refusing to accept anything less than their sticker price in cash. That’s why another important policy would be for Congress or DOL to require providers to publish a single, all-in cash price for services and to accept that price from any willing payer, including employers and their TPAs. If that price were required to be no higher than the lowest negotiated rate, it would create a ceiling for competition that reflects the true cost of care without the added burden of billing infrastructure and delayed payment.

This requirement isn’t as price-fixey and communist as it sounds - it reflects the truth that negotiated contracted rates are based on having to submit claims after the fact and all the associated billing bureaucracy and delay. Starting your cash price at the lowest negotiated contract rate is actually probably too high, and could easily compete downward with the efficiency of the cash price process.

That kind of requirement would not be easy to implement, and it would be resisted. But without it, the transition to a price-competitive market will remain slow and uneven.

What the Transition Would Actually Look Like

If anticompetitive contract provisions were banned by either regulators, Congress, or both, as they are starting to be for PBMs (which are really just the same carriers), the system would not immediately flip into a post-network world. There would be a transition period, and it would likely be messy.

Employers would begin by using networks as a fallback while selectively deploying cash payments and direct contracts where they are advantageous. It still would likely require firing the carriers as plan administrators and using indie TPAs (unless carriers were required to let employers use direct contracts and cash rather than forcing their networks as the only option). Most employers are not using indie TPAs right now. Over time though - not as much time as you might think - as operational capabilities improve and providers respond to shifting demand, those alternative pathways would expand.

As more volume moves through those channels, the relative importance of carrier networks would diminish. Their role would shift from being the primary mechanism for accessing care to being a residual safety net.

At a certain point, that model becomes unstable. If enough employers are able to obtain better prices outside the network, the value proposition of maintaining the network erodes. Providers would have a ton of leverage in their communities to say to a carrier: “if you don’t agree to my terms, I’m going to go to the local Chamber of Commerce and offer direct contracts to all their member businesses.” Contracts are renegotiated. The system begins to reorient. The carriers would have to pay those providers more, which makes the carriers less competitive to employers, and the carrier death spiral begins in earnest.

That is how you get to a post-network world - not through a single decisive break, but a gradual shift at first, and then a sudden collapse.

The Walls Are Closing In.

None of this is inevitable. The current system is highly profitable for both the carriers and the gangster hospital systems, and they have both the incentive and the ability to defend it.

But the walls are closing in. Employers are finding escape routes. Startup vendor partners are emerging to help them, using price transparency reports, commercial claims data, and AI. The carrier network’s days are numbered.

A post-network world is not a utopian dream - it is simply a market.