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EMPLOYERS IGNORING PRESCRIPTION

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Two decades after academia gave employers new recommendations for making managed care more competitive, most companies still are clinging to practices that fail to control either price or quality, a survey says.

Results from the Robert Wood Johnson Foundation Employer Health Insurance Survey presented by the Center for Studying Health System Change found that the model developed by Stanford University professor Alain Enthoven, who is often viewed as the philosophical patriarch of managed care, actually has been adopted by relatively few plan sponsors.

The "managed competition" model advocated by Mr. Enthoven requires plan sponsors to offer employees a choice of plans, to adjust financial incentives so that many workers opt for lower-priced plans, and to provide consumer information about competing plans so that employees can make judgments based on quality.

Most employers polled did not conform to any of the model's principles, said survey co-author Stephen H. Long, a senior economist with the Santa Monica, Calif.-based Rand Corp., which helped design the study.

In the case of plan choice, only 17% of private employers of all sizes that offer health insurance said they offer employees a choice of plans. Even among employers with 100 or more employees, only one-third offered a choice. If workers are counted instead of employers, about four in 10 have a choice of health plans.

Mr. Long emphasized that it is up to plan sponsors to take a leadership role and broaden choice among their plans. "The employees can't give themselves a choice," he said. "The employers are the decision-makers."

The second necessary element to managed competition that can save employers money is providing employees incentives to shop for lower-priced plans. It is counterproductive, in this view, for employers to subsidize health care premiums completely. Instead, the model advocates the employer pay the same amount toward employees' premiums no matter which plan is selected, forcing the worker to decide whether paying an additional incremental amount is worthwhile.

Thirty-one percent of businesses surveyed pay the full premium for employees, the survey found. Thirty-four percent pay an equal percentage of the cost, regardless of the plan chosen. Only about three in 10 pay an equal dollar amount toward all plans.

Finally, the last leg of managed competition's three-legged stool -- the provision of information on competing plans' quality -- also is far from solid, Mr. Long said. Seeing information beyond basic plan descriptions is extremely rare among employees of small companies. Even among plan sponsors with more than 500 employees, only 22% provide quality data to their workers.

Mr. Enthoven, a professor of management at the Stanford Graduate School of Business, said he concurs with the study's findings.

"I generally agree with what they're saying," he said. "Nationally, we are very far from doing it right."

Even in California, a state with many mature managed care markets, the California Managed Health Care Improvement Task Force -- a panel Mr. Enthoven headed -- found last year that about 40% of employees had only one choice for health coverage, he said.

Mr. Enthoven said one way to provide employees with more choices is through pooled purchasing coalitions that bring together small employers. These coalitions would increase small employers' clout and expand their number of health plan options.

Generous employer subsidies of workers' health care premiums have become difficult to reverse after having been put into place; they are a legacy of times when employers paid the whole cost to get tax breaks, Mr. Enthoven said. "Employees don't realize that it just comes out of their paychecks," he said.

As for consumer information, Mr. Enthoven said plan sponsors across the rest of the country should follow the lead of large California employers by giving employees comparative information such as HEDIS, or the Health Plan Employer Data & Information Set, and the results of consumer satisfaction surveys.

Copies of the study, "How Widespread Is Managed Competition?" are available free by contacting the Center for Studying Health System Change at 202-554-7549; fax: 202-484-9258.