The employer's case for health management

Employers' past solutions to rising health benefit costs--adopting managed care strategies, cost shifting to employees and reducing benefits-are no longer effectively controlling costs and are depressing the value of health benefits for employee recruitment and retention. An alternative strategy is to implement health management approaches that improve the health status of employees. These programs reduce medical costs and have a documented positive impact on workers' compensation, disability costs, absenteeism and productivity. Further, this approach is complementary to health care consumerism as a strategy for health improvement and benefit cost reduction and results in improved employee health, outlook and satisfaction.     

Will employee choice and defined contribution health plans salvage the embattled managed care system?

Defined contribution or consumer-driven health approaches will shift to employees not just the risks and rewards of the managed care system, but also decisions that will determine whether that system can survive. This article reviews the current state of the employer-sponsored health care system, describes defined contribution and consumer-driven health plan concepts, and outlines the approaches and steps employers can take to implement them. The author argues that, if fully implemented, such approaches could salvage the embattled managed care system by giving employees a financial stake in controlling medical costs while educating them to wisely take control of health plan spending decisions.     

Designing and managing employer-sponsored long-term care plans

Due to prevalent demographic factors, long-term care is an issue of increasing concern to American workers. The cost and time involved in ever-expanding long-term care responsibilities for many employees has resulted in increased indirect employer costs. The authors argue that providing' long-term care as part of the employee benefit plan is an efficient and effective way to manage these increasing costs for both the employer and the employee. The article offers discussion of plan design for long-term care, including issues to be considered and strategy for plan management.     

Potential “Savings” of Medicare: The Analysis of Medicare Advantage and Accountable Care Organizations

Medicare faces significant financial challenges because of rising health care costs. In response, Medicare reform efforts have been testing various payment and service delivery models, including accountable care organizations (ACOs), aiming to reduce expenditures while preserving or enhancing the coordination of quality care. The idea behind ACOs is to form an organizational network to coordinate all care for Medicare beneficiaries and in so doing, at least theoretically, improve quality of care and hopefully reduce medical costs. The purpose of this research is to apply Data Envelopment Analysis (DEA) to assess the potential savings of Medicare obtainable through optimally efficient implementation of ACOs and Medicare Advantage plans. DEA comparisons across plans achieve this purpose by identifying which Medicare plans operate relatively more efficiently and which are inefficient, and additionally, for inefficient plans, the DEA analysis generates target levels of “inputs” and “outputs” required to bring the plan into efficient operation. Knowing sources of inefficiency can also provide insights into Medicare reform, such as Medicare privatization and innovation models. Our results show that Medicare Advantage plans are more efficient in reducing health expenditures but incur higher administrative costs. Health expenditure savings can also be achievable by promoting government-sponsored managed Medicare such as ACOs. Finally, compared to the profit efficiency of Medicaid managed care plans, Medicare Advantage should have the potential for more Medicare market penetration from the supply (insurer) side.     

“Bounds for Ruin Probabilities in the Presence of Large Claims and their Comparison”, Vladimir Kalashnikov,April, 1999

Abstract

Performance measurement systems and report cards which attempt to measure and report the quality of care provided by managed health-care organizations, have become mainstream in health insurance markets as managed care penetration continues to increase. However, little is known about the impact formal plan evaluations have on the contracting and enrollment decisions made by health insurance purchasers and consumers. Information regarding the link between performance evaluations and enrollment is crucial for those charged with projecting future enrollments in and risk profiles of managed care organizations. This paper describes the performance measurement systems currently being used to evaluate managed care plans and reviews the empirical literature for evidence regarding the impact of measures on plan enrollments.     

Integrating benefits decision making

Integrated employee benefit decision making helps employees use their benefits more wisely and identify opportunities to balance their immediate benefits needs (such as health care) and future benefits needs (such as retirement). This article discusses how employers can overcome employees' behavioral barriers to making integrated employee benefit decisions by changing the ways benefits are communicated and employees are presented with action decisions. Undertaking these steps allows employers to not only improve their employees' overall financial perspectives, but also furthers plan sponsors' goals of actively promoting personal responsibility with respect to retirement funding and changing employee behavior with respect to controlling health care costs.     

Disruption of a Managed Competition Environment by Low-Ball Premium Bids

Abstract

This paper reviews the movement among multiple health plan options between 1994 and 1998 for Minnesota state employees whose work site was located in the Minneapolis/St. Paul metropolitan area. During this period the employer contribution was based on the lowest family premium bid from a qualified plan in the county of the employee’s work site. In 1995 the largest individual practice association model HMO in the state, Medica, reduced its state premium by 25%, becoming the lowest-priced option. This resulted in massive transfers of enrollees between plans. The point of this study was to estimate the risk changes that resulted from these movements between plan options. We obtained enrollment data by age and gender from Blue Cross Blue Shield of Minnesota (Blue Cross) and applied age/gender risk weight factors derived from actuarial rate tables to the Blue Cross cells. Annual changes in risk weights by 10-20% were common in a number of Blue Cross subpopulations, and in one case, by more than 50%.

The Blue Cross POS plan experienced increases in risk and went into a death spiral, while a second Blue Cross plan with a more restrictive provider network started with low risk, but experienced increases in risk when the Medica plan was withdrawn. Similar demographic data were not available from other plans offered by the state and claim costs were confidential, so the results pertain only to Blue Cross risks. The question is raised as to whether managed competition can work without some means of adjusting premium rates to the expected cost level of the enrollees of a particular health plan. All carriers seemed reluctant to guarantee premium rates after the 1994-1998 experience, and the state soon became self-insured.     

Engaging employees in health care can contain costs and improve quality

Employers need to do much more to change some of the deep-seated employee attitudes and behaviors that are driving health care costs. This article debunks common employer misconceptions about employees' attitudes and behaviors with regard to health care. It then discusses the results employers can obtain by taking specific initiatives that provide employees with the motivation and resources they need to effectively manage health risks and make informed health care decisions.     

More preventive care, and fewer emergency room visits and prescription drugs--health care utilization in a consumer-driven health plan

Although consumer-driven health plans (CDHPs) have grown dramatically, the question of whether CDHPs have reduced health care costs has not been answered definitively. This article presents what the authors believe to be the first study to analyze a large sample of claims data and to look in detail at different types of utilization among enrollees in a CDHP and those in a traditional comprehensive major medical (CMM) plan. After adjusting for the finding that CDHP enrollees are both younger and healthier than those in CMM plans, the authors found that CDHP enrollees show no consistent or significant utilization differences for measures over which consumers have little control (e.g., inpatient stays); lower utilization for measures over which consumers have greater control (e.g., emergency room visits); and higher utilization of preventive services.     

Hospital use behaviors and associated costs in a health insurance organization, Japan

Physicians are known to play an important role in the rise of health care costs. But patients--the other side of the chain of health care systems--have been given little attention. The present study utilized the outpatient claims (in the belief that the outpatient hospital visits are mainly decided by the patients) from a health insurance organization in Japan (the Fukuoka Prefecture public service mutual aid association for government employees who serve in small cities, towns, and villages) to analyze the employee behaviors in the use of hospital care and the costs associated with these behaviors. Number of diseases diagnosed for an employee, number of claims an employee submitted for one disease, number of hospitals an employee visited, number of claims an employee had from one hospital, and the total number of claims an employee submitted were used to describe the hospital use behaviors. Results showed that some employees exhibited unusual behaviors, characterized by having an extremely large number of diseases diagnosed, visiting a large number of different hospitals, having a large number of claims, etc. Higher medical expenditures were associated with such behaviors. The findings of this study suggest that the patients' role in the rise of health care costs cannot be ignored, and cost-containment strategies targeting modification of patient behaviors in the use of hospital care may prove to be very useful.     

Employee communications and health care reform

The Patient Protection and Affordable Care Act (PPACA) has made health care reform a reality. Although many of PPACA's details are still unclear to many employers, and most of the act's major reforms will take effect over the next several years, companies have reason to begin preparing for change and enough information to begin a communications effort with employees. The authors describe a number of immediate actions that employers should take to make the most of their own understanding of PPACA as it develops, as well as help their employee benefits leaders make the most informed decisions about when and how to communicate with employees about the law and its impact on their group health plan coverage.     

Can managed care reduce employers' retiree medical liability?

The Financial Accounting Standards Board (FASB) has forced U.S. companies to look squarely at their current retiree health obligations and their future commitments. Accounting Statement No. 106 (FAS 106) requires employers to accrue liabilities for retiree health benefits during employees' active service, rather than record the costs as benefits are paid. Employers are scrambling to find ways to reduce the statement's effect on corporate balance sheets. While managed health care has been increasingly employed to control benefit costs in active employee health plans, it has not been as popular in retiree plans. This article reviews important demographic and health trends in the retiree population and summarizes employers' early responses to FAS 106. It explores why managed health care has thus far played a limited role in reducing employers' postretirement medical liability, and offers insight into how that role could be increased in the future.     

Managing health and welfare plans instead of letting them manage you

The explosive growth and change in the health care provider industry is presenting a considerable challenge to employers that manage these benefits for their employees. Corporate mergers, supportive federal and state legislation expanding benefit availability and access to new consumer markets are a few of the forces changing the shape of the industry. Furthermore, participants are more knowledgeable about their benefit plans and are more vocal about their needs. The authors discuss these challenges and possible solutions for the employer that is attempting to determine how plan delivery and management needs can be served in a way that supports business environment and strategy.     

Health risk management: well-being for the employee and the bottom line

For most employers, a small percent of the employee/participant population accounts for a large percent of health care costs. However, the population of this high-cost group changes from year to year. The fundamental problem is keeping employees out of the high-risk/high-cost segment, something plan design changes cannot address but that integrated health risk management (IHRM) can help achieve. This article explains how employers can implement an IHRM program to significantly lower health care costs to a degree unattainable through traditional cost-control strategies, while simultaneously raising workers' productivity and well-being.     

The Effects of Offering Health Plan Choice Within Employment-Based Purchasing Groups

Employers may offer employees a choice of health plans either to promote competition among plans or to better cater to employee preferences for different types of products. This article examines whether the relationship between the availability of choice and insurance costs and coverage are consistent with these models of employer behavior. The results indicate that employers who offer choice have lower average premiums, primarily because employees are enrolled in less generous plans, and cover a greater proportion of workers than those who do not. The results are consistent with employers offering choice to accommodate diverse worker preferences.     

Direct provider contracting: one employer's experience.

Employers and unions typically offer an array of health care options to their plan participants including many managed care options. However, until recently, few have considered contracting directly with an integrated delivery system (IDS), therefore circumventing health plans altogether. This article offers a case study of one employer's experience with direct IDS contracting, including employee contribution strategy, benefits design and evaluation of the delivery system.     

The consumer-driven approach: defining and measuring success

Employers' reluctance to implement consumer-driven health plans (CDHPs) is at least in part due to their not understanding how to define and measure the success of CDHPs. To assist employers, the authors define potential points of success for CDHPs in the areas of consumer engagement, consumer financial considerations and employee health and productivity. They then offer ways of measuring success in those areas, as well as in the area of employer cost control. By taking a carefully considered approach to the decision of whether to offer a CDHP, employers can grasp potential opportunities to control health care costs.     

Changing employee values: deepening discontent?

This article presents a synthesis of data on employee attitudes gathered over the last 25 years. Most of the findings confirm the hypothesis that employees are discontented and expect more from their jobs now than they have in the past. While managerial satisfaction has remained relatively constant, the work satisfaction among hourly and clerical employees has sharply decreased. The authors attribute dissatisfaction to changes in the expectations and values of employees and warn that the deterioration of work attitudes may result in increased operating costs due to poor quality work, reduced output, absenteeism, etc. Instituting an employer attitude survey is suggested as a means of improving communication between management and employees and increasing job satisfaction.     

Employer strategies to combat health care plan fraud

Each year health care fraud drains millions of dollars from employer-sponsored health plans. Historically, employers have taken a rather tolerant view of fraud. As the pressure to manage health plan costs increases, however, many employers are beginning to see the detection and prosecution of fraud as an appropriate part of a cost management program. Fraud in medical insurance covers a wide range of activities in terms of cost and sophistication--from misrepresenting information on a claim, to billing for services never rendered, to falsifying the existence of an entire medical organization. To complicate matters, fraudulent activities can emanate from many, many sources. Perpetrators can include employees, dependents or associates of employees, providers and employees of providers--virtually anyone able to make a claim against a plan. This article addresses actions that employers can take to reduce losses from fraud. The first section suggests policy statements and administrative procedures and guidelines that can be used to discourage employee fraud. Section two addresses the most prevalent form of fraud--provider fraud. To combat provider fraud, employers should set corporate guidelines and should enlist the assistance of employees in identifying fraudulent provider activities. Section three suggests ways to improve fraud detection through the claims payment system--often the first line of defense against fraud. Finally, section four discusses the possibility of civil and criminal remedies and reviews the legal theories under which an increasing number of fraud cases have been prosecuted.     

Financing long-term care: employee needs and attitudes, and the employer's role.

Because of increasing life expectancies, high costs for nursing home and home health care, declining levels of informal family care, and the stated policy of the federal and state governments to foster self-reliance, individuals are increasingly exposed to the risk of financial ruin from long-term care (LTC) expenses. Yet, because of psychological barriers and aversions, particularly to thinking about residing in a nursing home, most individuals have not purchased LTC insurance. Hence, it may be the responsibility of employers to provide education to employees about LTC and to sponsor either individual or group plans of LTC insurance. Educational efforts may be particularly effective at the time of retirement when employees are in a more serious mood to consider the contingencies of retired life. A formal and perhaps more economical response for employers would be to offer combined life annuity and LTC insurance benefits through the retirement plan, provided certain regulatory and tax barriers can be removed.