Employers Have Mixed Emotions About Managed Care Options (2/10)

Employers Have Mixed Emotions About Managed Care Options

While the managed care debate rages on, employers continue to be caught in the middle, weighing rising costs against employees' desire for quality health care, according to the "1998 Employer Survey on Managed Care" conducted by the Integrated Health Group of Deloitte & Touche LLP.

"Employers are trying to strike a balance between their organization's need to manage health care costs while meeting employee demands for provider access and choice," says Eileen Raney, national director of the Integrated Health Group. "Despite the promise that managed care would reduce costs, increase benefits, provide preventive health care, and increase quality, after several years, only part of the promise has materialized - employers are going to have to become very sophisticated shoppers in order to get their money's worth."

Respondents reported that premiums increased an average of 7 percent in 1998, and they anticipated an 8.7 percent jump in 1999. Respondents also reported that health maintenance organizations (HMOs) held the line on costs better than other plan types, with average premium increases at 5.6 percent. In contrast, in 1999 HMO costs were expected to increase an average of 7.5 percent, compared to the 10.1 percent and 10.6 percent increases for 1998 and 1999, respectively, in preferred provider organization (PPO) premiums.

Despite cost increases for all plan types, employees are demanding and getting more choice. More than three quarters (77 percent) of employers responding to the survey offer more than one plan option, with the average employer offering four plan options. Employers see participation in HMOs remaining flat, while participation in higher-priced PPOs - which have the highest employee-satisfaction rating - are expected to increase the most during the next few years.

Employers are also exploring disease management and alternative medicine as ways to improve health care delivery. "In many ways, employers are responding to employee demands by taking the path of least resistance," notes Raney. "The difference this time around is that most employees will pay the higher cost through increased premiums."

Use of chronic illness and disease management programs is still relatively low as well, with 33 percent of the employers having some program in place. Only one condition - high-risk pregnancy - is currently targeted by more than half of the employers surveyed. As of the 1999 survey, more than 50 percent of the employers surveyed rely on plans and vendors to monitor their own performance; only 8 percent use an independent valuation methodology to compare health plan performance. Only about one in five respondents currently offers integrated disability benefits, and most respondents (71 percent) do not intend to integrate them in the near future.

With costs and employee dissatisfaction increasing, it would seem evident that close monitoring of plan performance by employers would be a priority, but that's not the case. "Only 26 percent of the employers we surveyed have some certainty about costs through multiple-year rate guarantees," says Barbara Adachi, survey director and a partner with the Integrated Health Group. "Yet, less than half have some performance standards in place, and, of those, only a quarter back up standards by putting premiums and/or administration fees at risk."

In the final analysis, the study clearly shows that employers will have to take an even larger and stronger role in their employees' health management. Raney adds: "We're definitely moving to an environment where employers will be looking to other means to control costs and get more for their healthcare dollar."