Two of the most important health insurance terms to understand are “in network” and “out of network.

Most health insurance plans define a “network” of health care providers (including doctors, hospitals, and urgent care and diagnostic facilities) and pharmacies that the insurer has contracted with to get the best rates — for the plan overall, and for individual members. That’s one of many reasons not to go without insurance. Since insurers represent large numbers of people, they can negotiate much lower rates with providers than what you would pay on your own if a provider charged you directly.

Using a provider that’s in your health plan’s network when you need care means the rates are lower and your insurer picks up more of the costs, so you pay less.

If you go outside that network, the cost will be higher — because your insurer didn’t negotiate a contract with that provider to get a lower rate.

Depending on your plan, an insurer may also cover less (or none) of the cost when you go out of network. If the insurer covers up to its own approved rate, the provider can still charge you a much higher price beyond that covered amount (a practice known as “balance billing”), which you will owe out of pocket.

Bottom line, if you use out-of-network providers, you’ll pay more. Potentially much more.

Dental and vision insurance plans have provider networks, too — and many of the same rules apply, so you’ll want to choose dentists, opticians/optometrists and other providers that are in your plan’s network.

Paying Attention to Networks: A Cautionary Tale

Before I learned about networks as a Highmark employee, I learned about them the hard way. I scheduled diagnostic tests without checking to see if the lab was in my plan’s network.

The lab I went to had been in network with a previous health plan, and similar tests had been covered with a low copay. This time, though, it was out of network — and I got a bill for several hundred dollars that I had to pay out of pocket.

I’d like to blame the insurer, since it’s a competitor of Highmark’s, but the truth is that this is how almost every insurance plan works. From your monthly premium to your out-of-pocket costs, if you want to pay less, you have to pay attention to networks.

The infographic below from America’s Health Insurance Plans (AHIP) gives you an idea of how much more you could end up being charged when you go out of network. The infographic is part of AHIP’s larger report on charges billed by out-of-network providers; AHIP also offers a comprehensive guide to understanding health plan networks.

Infographic showing out-of-network costs

Understanding Networks as a Health Care Consumer

Networks aren’t just something to pay attention to when you’re choosing a provider for care; they should be part of what you look at when you select or shop for your health plan each year.

“It’s become very important for the consumer to understand networks because of two industry-wide trends,” says Mike Mary, manager of retail operations for Highmark Direct, which offers one-on-one advice on health insurance plans, customer service issues and other assistance in comfortable “store” settings throughout Pennsylvania. “First, most plans, including employer-provided plans, have higher levels of cost sharing, so when you go out of network, it impacts you directly.”

Cost sharingPortion of an insurance bill and pen is the money you pay out of your own pocket for a covered service. That includes coinsurance, copays and similar charges up to the amount of your deductible.

With U.S. health care costs climbing higher than other countries, employers and insurers have seen that individual consumers play an important role in controlling costs. So, many of today’s health plans require us to take on (and therefore think about) more of our own costs.

It’s one thing to go out of network if someone else picks up the bill or you’re only on the hook for $25. But with today’s plans, going out of network could easily cost you hundreds or even thousands of dollars unnecessarily.

Networks Are Getting Narrower — but That’s Not All Bad

As Mary admits, staying in network has become trickier due to a second health care industry trend: “Driven by market forces and the need to control costs, there has been a shift away from health plans having very broad networks where most local choices were in network,” he says. “Now, in almost every major market, the most affordable plans are tied to much more select networks.”

He empathizes with the frustration people feel in regions like Highmark’s western Pennsylvania market, where many people had plans with broad provider networks in the past but now are being forced to deal with more narrowly (and complexly) defined networks. But he adds that most geographic markets in the U.S. have had this kind of network segmentation for years, and the trend is really about controlling costs, including the total system costs that impact health plan premiums.

Highmark Direct store managers Lesa Portzline and Joe Baumiller both say that this is one of the key points they emphasize when talking with customers about choosing a health plan.

“The biggest thing I make sure people understand is that, as long as we get you the right plan for your needs, the network is working for you,” Portzline says. “This is a way of controlling your costs.”

“Once we show people how and why a select network lowers cost, they usually get it,” Baumiller adds. “If an insurer can contract for lower reimbursement rates with certain providers, then the insurer can also charge the consumer less for coverage when you use those providers.”

All of our experts are also quick to point out that cost is just one factor to consider when it comes to health care. If you look at how different types of health plans define and use networks, you can see other variables come into play, such as quality, convenience and personal preferences. Highmark’s approach focuses on what are called high-value networks.

“In any health plan network, you’re striking a balance between lowering costs and preserving choices,” Mary points out. “Different plans and networks fit different health care needs, financial situations and other factors. So our goal is to empower the consumer with the information and tools they need to make a smart decision.” (See sidebar.)

Baumiller says that two other factors are important to understand with relation to networks: emergencies and travel. “You’ll sometimes hear reference to a plan’s ‘emergency care network,’” he says. “In one sense, this is pretty simple: In a true emergency, everything is in network until the emergency is resolved. It can get more complicated if you stay in a facility or return to a facility after the emergency condition has passed, but you don’t need to choose a health plan based on fears about getting to an in-network provider during an emergency.”

Travel, on the other hand, impacts what is “in network” in different ways depending on your plan. “With plans based on a limited, regional network, if you see a provider while traveling, you’ll almost certainly pay out-of-network costs, and you don’t have the option of seeing a specialist located outside your region,” Baumiller says. “This is one of the most valuable aspects of being affiliated with Blue Cross Blue Shield. Many Highmark plans give you in-network access to the entire Blue Cross Blue Shield PPO network — which is well over 90 percent of doctors and hospitals across the U.S. That also means you can get specialty care at places like Cleveland Clinic, Johns Hopkins and the Mayo Clinic, if you choose.” (For information on coverage while traveling abroad, see sidebar.)

“Tiered” Networks: More Options (and More to Think About)

Like a number of insurers around the country, Highmark now offers a “tiered network” with many of its health plans. The details (and naming conventions) of such networks vary, but the general idea is to have more than one tier of in-network providers to maximize potential cost savings while retaining more choices for the individual consumer.

Highmark’s tiered network approach began in 2014. Certain plans in central Pennsylvania had an “enhanced” tier — a select provider network that offered the best cost savings — as well as a broader “standard” tier of providers that were in network but cost a little more. This was applied to Highmark plans in other regions in 2015, and some plans now have three tiers: Preferred Value, Enhanced Value and Standard Value Levels of Benefits.

On first glance, that might feel like yet more to sort through. But Baumiller says that in his experience working with health plan shoppers, once the tiered network is explained, many of them appreciate the extra choice and assurance that these plans provide.

He points out that while almost everyone finds the lower cost of an insurer’s select network appealing, an all-or-nothing approach to what is “in network” or “out of network” doesn’t always fit their situation. “We want people to be comfortable with their options,” he says. “In a tiered network, the preferred tier represents the best rates possible, and may also involve quality or best practices criteria. But if you want to choose a doctor or facility because of location, or a personal recommendation, or any number of other reasons, you have the flexibility to look at additional tiers without being out of network.”

Portzline adds that good tools and accessible information can help members be more satisfied with their plan networks, and tiered networks in particular. In short, if it’s easy to figure out whether a provider is in network and which tier they’re in, then cost savings and choice stay top of mind. If it’s frustrating to find reliable network information, people may not pay attention to their network at all — until they get a bigger bill than they expected (or are able) to pay.

She says that telling new Highmark members how they can check their network is just as important as explaining their health plan’s coverage or premium. “We make sure members know about Highmark’s online provider directory and My Care Navigator service so they can easily check a provider’s network status,” she says.