The Right Ingredients for a 2-Tier Health Plan
You’ve probably heard us talk about 2-tier health plans—how they can drive down costs through direct hospital partnerships while maintaining broad national access. We’ve been talking about them a lot lately, and for good reason: when designed correctly, they deliver serious value.
But getting one off the ground isn’t as simple as flipping a switch. It takes the right structure, the right partners, and the right strategy to make it work. Let’s take a look at what it really takes to build a 2-tier plan that performs.
Learn more at https://memberlybenefits.com/2-tier-plan/
- Start with the Right Foundation: Self-Funding
To create a true 2-tier plan, you’ll need to be self-funded or level-funded. In New York, that generally means having at least 100 full-time equivalent (FTE) employees.
That’s because direct contracting with hospitals and building custom network tiers requires flexibility in how the plan is structured—something you won’t get from traditional fully insured models. Once you meet that threshold, you can start shaping a plan that gives you more control over costs, claims, and care quality.
- Secure the Key Players
A strong 2-tier plan depends on having the right lineup of partners. You’ll need: A Third-Party Administrator (TPA) experienced in managing multi-tier networks A stop-loss carrier that understands the savings potential of direct contracting A regional Tier 1 network (like Northwell Health in the New York Metro area) A national Tier 2 network (such as Blue Cross Blue Shield) for coverage everywhere else
Each piece plays an important role. The TPA connects the parts, the stop-loss carrier protects the plan financially, and the two network tiers balance local cost efficiency with national accessibility.
- Make Sure the Networks Are Integrated
This step is often overlooked—and it’s where many 2-tier plans run into trouble.
Your TPA must have these networks fully integrated into their system. If not, the plan can’t process claims accurately between tiers, which creates confusion and wipes out the expected savings.
So, before launching, confirm that your TPA has established working relationships and technical connections with both networks. If not, be prepared to move to a TPA that does. It’s a necessary ingredient for success.
- Understand the Cost Structure
While 2-tier plans deliver meaningful savings, those discounts come with a cost.
Be prepared to pay around $20 per employee per month (PEPM) for access to the Tier 1 network. That fee supports the direct hospital contract and the infrastructure needed to maintain preferred rates.
However, these costs are typically more than offset by the combination of: Stop-loss premium discounts (due to lower expected claims) Reduced facility and provider costs within Tier 1 Improved claims efficiency and data control
In short: the Tier 1 access fee is an investment that pays for itself through real and measurable savings.
- Work with a Stop-Loss Carrier That Understands the Model
Not all stop-loss carriers are familiar with 2-tier structures—or willing to rate them properly. The right carrier will recognize the reduced risk associated with Tier 1 hospital partnerships and may offer a discounted rate on the stop-loss premium.
That’s real savings right from the start. The stop-loss carrier, like you, benefits from reduced claim volatility and improved cost predictability—so everyone wins when Tier 1 utilization stays strong.
- Drive Tier 1 Utilization
Even the best-designed 2-tier plan won’t deliver results unless members actually use Tier 1 providers. Education is key.
When employees understand that care through Tier 1 hospitals and doctors means no or lower deductibles, lower copays, and better care coordination, they naturally start steering their usage.
This not only benefits them—it keeps the plan sustainable and maximizes the return on the direct hospital relationship. Remember, the stop-loss carrier and the employer are both counting on Tier 1 usage to deliver those lower costs.
- Bringing It All Together
Designing a 2-tier plan takes coordination, but once the framework is in place, the payoff is clear: Lower healthcare costs Better access to high-quality care Stronger alignment between employers, hospitals, and members
At Memberly, we’ve assembled all the key ingredients—TPAs, networks, and stop-loss partnerships—to make 2-tier plans run smoothly. In the New York Metro area, for example, our structure uses Northwell Health as Tier 1 and Blue Cross Blue Shield as Tier 2, creating a balanced and cost-efficient model that works for employers and members alike.
The Takeaway
A 2-tier health plan isn’t just a trend—it’s a smarter framework for controlling costs without compromising care.
If you’re ready to explore a direct hospital contract strategy or want to see how a 2-tier structure could work for your organization, let’s talk. Learn more at https://memberlybenefits.com/2-tier-plan/Retry
