MedicalPracticeCME.com

EMPLOYER GROUP PERSPECTIVE – Class 9

Studies indicate that employers want predefined cost, quality and accountability criteria along with its healthcare providers to be partners with the company in its efforts to contain healthcare costs. Employer groups engage in selective contracting on that basis. Sophisticated employer groups will challenge the contention that “our patients are sicker and that is why our costs are higher”. Further, studies indicate good quality does not necessarily cost more, it may well cost less.

Some of the major factors large company employers will look at in selecting which providers they will contract with to render care to their employees are:

(1) Predefined cost.

(2) Quality – looking at cost per case, patient outcomes, quality of providers health care delivery process, structural standards such as certification and credentialing.

(3) Accountability criteria.

This goes with outcomes accountability and it can go with employers wanting assurances that its healthcare providers will partner with the company in its efforts to contain healthcare costs, such as having the insurance carrier and the hospital provider network assist in educating employees to become better consumers of healthcare services.

(4) Integrated Delivery System (IDS) that links physicians with hospitals.

This system will be willing to go at risk for care and to be held accountable for clinical outcomes. It will replace fee-for-service with package pricingfor a continuum of inpatient, outpatient, and physician services. It will have its own utilization review and quality assurance mechanisms. It will have systems and structures for case and cost managers. It will be selective in credentialing providers into the network and able to process claims.

(5) Integrated Delivery System (IDS) that is self managing.

1. HEALTH SAVINGS ACCOUNTS

Many employers are looking at consumer-driven healthcare as a way to help reduce increasing healthcare costs and provide greater flexibility to their employees.  Consumer driven healthcare is defined as a system where consumers, not the company or insurance provider, determine how and where to spend their healthcare allotments.  There are a variety of types of plans available, each with its own particular benefits and drawbacks.

Some small employer groups and self-employed might look to Medical Savings Accounts (MSA) as an alternative to traditional insurance. Under the 1996 Health Insurance Portability and Accountability Act (HIPAA), medical savings accounts combine high-deductible, low premium health insurance policies with tax-deferred, interest bearing savings accounts. Because the law authorizing medical savings accounts permits the saved funds to be rolled over, the money can continue to accumulate and earn tax-deferred interest. These accounts can double as retirement benefits.

Because medical savings accounts use a high deductible which can be as much as $2,250 for individuals and $4,500 for families, the premiums are more affordable for small businesses and self-employed. The savings earned form the lower policy costs can be invested into authorized savings accounts which then are used to pay for ordinary health care expenses. The high-deductible policies cover major medical expenses only.

Some small employer groups believe that the savings accounts will force the employees to spend their health care dollars more wisely. For example, one company chose to fund its employees’ medical savings accounts to the maximum permitted under law – $1,462 per year for individuals and $3,375 for families. This company believes that because the money is designated as income to the employees they will use it in a much more consumer-driven fashion.

Congress limited the number of individual participants to 750,000 by the year 2001. Industry analysts estimate that fewer than 30,000 accounts have been established so far.

A reason that MSAs have not flourished may be because the type of small businesses typically attracted to these plans are those with monetary constraints and do not fund their employees’ savings accounts. This scenario can leave workers with high out-of-pocket costs for their health care needs and savings accounts they might not be able to afford to fund.

There may be situations in which wage earning employees faced with the prospect of paying out of pocket for doctor’s visits simply stop seeking medical care. Questions about the impact of these plans have caused benefit consultants to caution employers to research their options carefully. Also, benefit consultants may encourage business owners to offer not only medical saving accounts but also HMOs and PPOs as a choice among several health care insurance options for its employees.

1. EMPLOYERS MAY CUT BENEFITS OR RAISE EMPLOYEES SHARE OF COSTS

According to Interstudy, in 1997, HMOs accounted for 22% of the commercial health insurance market in the Chicago area, compared with 40% in the Los Angeles area and 27% in metropolitan New York area. Chicago market is also at the low end of the patient satisfaction scale according to surveys of major markets by CareData Reports of New York.

Excluding HMOs, about 50% of buyers of insurance in Chicago have policies with PPOs. According to an analyst in the Chicago area, the future of PPOs is unknown as plans become more expensive. This analyst claims that this year’s HMO premiums are up 3% compared with 1997’s while PPO rates increased 5.5%. This analyst said that small employers who are the most sensitive to price increases, might lead a shift to HMOs.

Some predict that HMOs marketshare will grow to 40% by the year 2000, while PPOs share will sink to 33%. Others predict that employers in PPOs will respond to higher prices by cutting benefits or raising employees’ share of the costs rather than switch to HMOs.

1. WELLNESS PROGRAMS

Corporate wellness programs have become more of the rule than the exception. Companies might offer their employees various benefits such as company fitness centers and summer camp for employees’ offspring. Formal wellness centers might include exercise equipment, weight-loss programs, seminars held in the cafeteria during lunch hour, full-fledged health plans, and company-produced newsletters.

In addition to the convenience and low employee cost of the programs, many employers claim that the health and wellness programs lure and retain a talented workforce. Wellness initiatives can lower corporate health care costs, reduce the number of sick days taken, and increase productivity.

Targeted wellness programs which include ergonomics for the office, stress management techniques, and weight-loss programs are on the rise while on-site fitness centers with stairmasters and exercise bicycles are on the decline. Insurance companies may reduce a company’s premiums for being proactive in keeping employees healthy such as having an expert come into the company to talk about weight loss, stress management or smoking cessation.

A general rule of thumb is that a company can save $3 for every $1 it invests in wellness programs. On average, it takes three years for a company to see that return.

The industry guideline for determining if a company should have its own on-site health center is 5000 eligible lives. A company with 1,800 employees typically meets this guideline by including dependents and retirees as part of the calculation of eligible lives. Other factors in determining if a company should have its own on-site health includes looking at the companies access to healthcare and wellness services. If such access is widespread, capital expenditures for on-site health clinics are unnecessary. But for companies with limited healthcare choices, an on-site health clinics may make sense.

Top of page