The Impact of 'All-or-Nothing' Contracts and Member Steerage on Health Insurance

Ben H.

Ben H.

Oct 19, 20233 min read


The Impact of 'All-or-Nothing' Contracts and Member Steerage on Health Insurance


In today's complex healthcare landscape, health insurance contracts and member steerage strategies play a crucial role in determining healthcare costs and the quality of care provided to individuals. This article explores the effects of 'all-or-nothing' contracts and the innovative approach of member steerage, shedding light on their impact on healthcare outcomes and costs.

The Dilemma of 'All-or-Nothing' Contracts:

One notable case that exemplifies the challenges posed by 'all-or-nothing' contracts is the situation faced by Walmart, a major employer offering health insurance to its employees. Walmart aimed to exclude the bottom 5% of doctors from their insurance network, seeking to improve the quality of care received by their employees. However, their insurance carrier denied this request, citing the nature of their contracts with hospital systems and physician groups. These contracts stipulated that they either include all physicians from these systems or exclude them entirely.

Innovative Approach: Member Steerage:

Contrary to Walmart's experience, the Pittsburgh Area School System adopted a unique approach to member steerage. They decided to eliminate out-of-pocket costs for plan members if they chose to visit the top 10% of doctors. This strategy aimed to incentivize individuals to seek care from the highest-performing physicians within their network. The results were astounding - their healthcare costs decreased by a staggering $3 million.

The Impact on Healthcare Costs and Quality:

The Walmart case highlights the limitations of 'all-or-nothing' contracts, as they prevent employers from selectively including or excluding physicians based on their performance. While the intention behind these contracts may be to maintain strong partnerships with hospital systems and physician groups, the inability to exclude underperforming doctors can hinder efforts to improve the quality of care provided to plan members. On the other hand, the Pittsburgh Area School System's approach demonstrates the potential benefits of member steerage, as it not only improved the quality of care by encouraging visits to top-performing doctors but also led to substantial cost savings.

Actionable Advice:

1. Evaluate the Flexibility of Health Insurance Contracts:

When considering health insurance options, employers should carefully assess the flexibility of contracts. Understanding the extent to which they can include or exclude physicians based on performance can greatly impact the quality of care received by employees.

2. Consider Implementing Member Steerage Strategies:

Employers can explore member steerage strategies, such as incentivizing plan members to visit high-performing doctors within their network. By encouraging individuals to seek care from top-quality providers, employers can improve healthcare outcomes and potentially reduce costs.

3. Collaborate with Insurance Carriers for Customized Contracts:

Employers can work closely with insurance carriers to negotiate customized contracts that align with their goals. By fostering open communication and collaboration, it may be possible to find a middle ground that allows for selective inclusion or exclusion of physicians based on performance.


As the healthcare industry continues to evolve, it is crucial for employers and insurance carriers to acknowledge the limitations of 'all-or-nothing' contracts and explore innovative strategies like member steerage. By prioritizing the quality of care and cost-effectiveness, employers can create a healthcare system that benefits both plan members and their organizations. Evaluating contract flexibility, implementing member steerage strategies, and fostering collaboration with insurance carriers are actionable steps towards achieving this goal.

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