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Employers are adopting a variety of strategies to make managed care plans more responsive to their needs and to hold down costs.
One growing trend among employers is to buy standardized health care plans offered by HMOs, according to Leslie Schneider, a principal with Buck Consultants in Atlanta. This approach contrasts markedly from that of the past few years, when employers sought to customize their managed care plans, Ms. Schneider said.
Many employers are turning to the standardized plans, she said, "because they want something easily understood by employees and simply administered by plans."
Additionally, standardized plans are generally less expensive to the employer, which is important when some employers are looking at double-digit cost increases for 1999.
"You can have a little bit of customization without driving up costs, but when you get into heavy customization, you drive up costs more," Ms. Schneider said.
The increased use of standardized plans means HMOs can offer fewer plans. So, rather than offer scores of plans, HMOs are providing five to 10 plans and cutting down on their administrative costs, said Helen Darling, practice leader for group benefits and health care in the Stamford, Conn., office of Watson Wyatt Worldwide.
It benefits both HMOs and employers to have less customization and more standardization, according to Ms. Darling. Administration "can be chaos," she said. "It makes some sense to bring it down to a manageable number."
One problem for some HMOs trying to achieve more standardization nationwide, however, is that many of the large HMOs have merged in recent years and are still working on integrating their systems, said Neil Austin, director of national consulting practice for the MEDSTAT Group in San Francisco. "The kinks are not yet worked out," he said. As a result, employees in one area of the country may not be treated the same as employees in other areas.
A similar employer strategy for easing health plan administration has been to try to negotiate similar plan designs with multiple HMOs and to allow employees to choose among the plans.
This has been done by Laboratory Corp. of America Holdings, said Craig Drake, director of corporate benefits for the Burlington, N.C.-based company. Rather than administer its HMOs individually, the company has a policy of managing its entire spectrum of plans as a group, he said. Starting in late 1996, the company attempted to equalize the services offered by each of the 16 plans it currently uses, so that the services are now essentially the same. This forces the employees to choose plans not based on what services are covered but by the providers in the network and the costs of the plan. As a result, the HMOs now compete on the basis of price, customer service and their selections of providers, he said.
Also, the company now offers only two HMO options at each of its locations, helping to reduce employee confusion over the plans. This also allows the HMOs to obtain enough enrollees to provide stable rate bases, he said. Since the HMOs are familiar with the plan, "in a sense, it's very easy to implement," Mr. Drake said.
A similar strategy has been pursued by the Pacific Business Group on Health, according to Emma Hoo, senior project manager for the employer coalition in San Francisco. In 1994, PBGH negotiated a standard HMO package with 12 HMOs in the state. To date, more than 400,000 people from the coalition's 35-member companies have enrolled in these plans.
The idea is "to be able to compare the value of one plan relative to another, so you're looking at the same package," Ms. Hoo said. "It compares apples to apples," she added.
Rather than having employees compare different plans from different HMOs, the standard plan lets employees choose based on the panel of providers and the plans' performance, as evaluated by the coalition.
Beyond the standard plans, each plan offers certain options that members' employers can choose from, like picking additional options to customize a new car. Employers can choose more or fewer options, which will be reflected in the cost of the plan.
Rather than change health plans and disrupt employees, many employers are opting to work with health plans to address the issues that are driving up claims costs, said Rich Sinni, New York health care practice leader in the New York office of Watson Wyatt Worldwide.
"It's basically looking at what's not been working with the plan and improve it," Mr. Sinni said. "If there is a particular illness or disease within that plan, make sure it is addressed," he noted.
To help employers, Watson Wyatt has been conducting "a health plan evaluation" with some of its clients, he said. The goal is to "evaluate the health plan and see what's not working," and then correct it.
After the evaluation is done, Watson Wyatt and the employer bring the findings to the plan and ask it to develop a strategy to correct the problems. The key to correcting the problem is a good relationship, almost a partnership with the plan. "If it's an adversarial relationship, it's not going to happen," Mr. Sinni said. "You each have to do your part."
Although few employers are adding covered services to their HMOs, many are including disease management programs or are strengthening existing programs that address health problems among their employees, consultants said.
Employers want the health plans not only to have disease management programs but to "focus them on the right diseases," said Blaine Bos, principal in the Chicago office of William M. Mercer. For example, a company that has identified a problem with asthma among its employees might initiate an HMO's disease management program to reduce the number of asthma attacks.
Perhaps in response to requests by employers, many HMOs now are promoting their disease management features. "Health plans and drug companies are competing on this," Ms. Darling said.
Beyond managing diseases, employers, principally large ones, are looking at ways to improve their HMOs' operations, to make them work better while also reducing costs.
Employers "look to improve the way the health plan delivers services," Mr. Bos said.
Most sophisticated buyers realize that "if they tweak the health plan design, it won't have a large impact on cost." So they focus on changing the operations to make it more efficient and to keep cost increases in line, he said.
The response by plans has been somewhat mixed, Mr. Bos said, with some appreciating that employers want to work with them, while "some plans are saying, 'Get out of my business,' " he said.
Ameritech Corp. in Chicago, for example, asks that the many HMOs it contracts with meet certain administrative conditions, said Alan Peres, manager for benefit strategy and implementation. Over the years, they have pushed the HMOs to be accredited by the National Committee for Quality Assurance, and they have customized their plans to exclude coverages such as dental or vision care that are covered by other, separate plans.
Pushing HMOs to add providers or hospitals has also been used by employers to tailor their plans, consultants said. "The most important customization is who's in the network," said Watson Wyatt's Ms. Darling.
This kind of change is hard for plans, however, as plans generally already have a full network of providers.
An important factor that often determines what type of changes are sought is the size of the employer, said Carmine Morano, president of Anthem Health & Life Insurance Co. of New York. For small employers, "the most important thing is price and network," Mr. Morano said.
The best way for smaller companies to lower health plan costs is to raise the employees' copayments, raise the deductible, or reduce the percentage covered for out-of-network providers, he said. Another method is to lower the amount that plans consider reasonable and customary for out-of-network services, thus increasing the employee's portion of the charge.
"Smaller employers will work within standard parameters that a plan has -- to put a different variety of the plan in existence -- in order to reduce expenses," Mr. Morano said.
He said a standard procedure with some health plans, when sending out a notice of a proposed rate increase, has been to include a list of ways to reduce the increase by altering the plan. "Activity in that area is robust," he said. "Almost all employers are making some sort of plan change."
Large employers can use the same techniques to lower a rate increase, but they have additional tools not at the disposal of small employers, he said. "They have a lot more flexibility within the scope of the plan than small groups have," Mr. Morano said. For example, they can attach riders that exclude certain coverages, such as for certain drugs or services.
Another strategy is to charge employees more for the plan, something employers rarely do, as it upsets employees. The best thing for employers is "to change the things in the plan the employees don't see," such as increasing the out-of-network charges, Mr. Morano said.