EMPLOYERS: Don’t Keep Heat on Plans
Most large employers do not pressure their health plans to improve performance, costing businesses millions of dollars per year, a new study reveals. Watson Wyatt Worldwide surveyed 181 employers with an average of 20,000 employees, and found that fewer than half did an "adequate job in six of eight best practices to optimize their relationships with health plans," including: periodically auditing health plans, measuring plan performance against specific benchmarks, developing a formal strategy for dealing with health plans, making multi-year commitments to plans, sharing data with plans, defining performance outcomes, monitoring plans' performance and reporting of data, and establishing criteria for purchasing coverage. For example, only 59% said they did well in establishing criteria, 45% in developing a formal strategy, 38% in conducting routine audits and 34% in comparing performance to benchmarks. Furthermore, the study found that adhering to the best practices makes a fundamental difference in a company's bottom line. Firms that reported premium hikes of less than 5% in 1998 and 1999 "said they have done a good job performing an average of 3.5 of the eight best practices." On the other hand, those that experienced 9% or higher increases said they performed well in 2.7 of the practices. That seemingly subtle difference accounts for an average $6 million savings annually. But Richard Ostuw, Watson Wyatt's global practice director, said many businesses simply are unaware of how best to monitor their plans. He said, "It's hard for companies to take initiative if they don't know what they need to do and how to do it. Few employers have the skills to do it themselves. They don't have the experience and technical knowledge about health plan processes and procedures." Ed Susank, principal with William M. Mercer, emphasized the importance. "The rate at which health plans create innovation can be accelerated by pressure from large employers," he said. Ostuw noted that double-digit premium increases will force many businesses to reassess their dealings with plans (Shinkman, Modern Healthcare, 8/23 issue).
About Those Increases
Another study by Dr. Herbet Loveless, an analyst with Irvine, CA- based ExperTeam, concludes that recent changes in the health care system will lead to double-digit increases for at least the next five years, impacting employers dramatically. HMOs are finding it difficult to cut costs as providers consolidate to gain leverage, patients learn how to bypass a gatekeeper and pharmaceutical costs explode. Over the recent four-year period, sales of retail pharmaceuticals increased 20% when the patient paid out of pocket, but 156% when a health plan paid for the prescription. Loveless predicts that to combat these trends, HMOs will begin to consolidate, as well as move toward global budgets in order to cut overhead and better control costs and force providers to control costs. In the meantime, however, employers will seek to mitigate premium increases. The ExperTeam study notes that Daimler-Chrysler holds joint meetings with all of its Michigan HMOs, while other employers have threatened to contract directly with providers (ExperTeam release, 8/25).