Managed care is right course, employers say

Managed care is right course, employers say – 1992 National Executive Poll

Norma Harris

Our 1992 National Executive Opinion Poll shows employers are confident in managed care and are finding strategies to reduce costs.

Employers are confident about managed care and many believe it is their only chance to control health care costs, according to the third annual National Executive Poll conducted by B&H.

Among the key findings are the following:

* Employers are less likely to offer indemnity plans this year than they were last year. According to the survey, 64% of respondents offer an indemnity plan–a decrease of 15 percentage points over last year.

* And 22% of respondents say they will opt out of traditional insurance and offer only managed care instead.

Rating health care programs that they currently offer in terms of effectiveness for cutting costs, 69% of respondents say case management has produced the best results. Self-insurance was also rated highly at 65%, a significant increase over last year, when 54% of respondents say they found self-insurance was effective.

Asked how much of a cost saving, if any, they had seen as a result of being self-insured, 26% of respondents say they had seen “a great deal,” while 51% say they had experienced “a moderate amount” of cost savings.

Questioned about how they administer claims, 61% of self-insured respondents say they use a third-party administrator, and 22% use a commercial insurer. About 13% administer claims in house, while 13% use Blue Cross-Blue Shield.

Barbara Moschella, benefits manager at Jamesway, Secaucus, N.J., a regional department store chain, says self-insurance streamlines the company’s operations. “We have better control of where our dollars are going and we can see quickly where they go. Since we fund the account, we also know how much money we are paying out.”

George Barclay, president, Federal Home Loan Bank of Dallas, in Dallas, says the bank is one of 12 in a group that is considering mioving out of indemnity plans and toward managed care plans to cut health care costs. The decision about managed care will be made later this year.

Robert Plantz, vice president of human resources at Leaseway Transportation, a Cleveland, Ohio, transportation services company that employs 11,000, explained his responses in a follow-up interview. “I’m a firm believer in managed care. I believe it is an employer’s one real opportunity to lower costs,” says Plantz. Leaseway offers employees an open-ended HMO (point-of-service plan) and in areas where no HMOs are available, an indemnity plan. The managed care strategy is paying dividends. “This year we are seeing a 5% to 8% reduction in terms of annual health care costs, which is better than we would have seen under a full indemnity program,” says Plantz.

Of the employers who were polled by B&H in April and May, 61% say sharing costs with employees is “very effective,” compared with 48% of respondents to last year’s executive opinion poll.

B&H’s 1992 poll asked employers about a variety of health care issues to identify areas that are causing the most concern as well as strategies that are proving beneficial in reducing their health care costs. (See Data watch, page 14.)

Forty-seven percent of employers responding to the poll say HMOs are an effective means of cutting their health care costs. That is a significant increase over 36% of employers that responded to the 1991 survey. Looked at regionally, our survey found that employers in the West (67%) are more likely than those in the South (37%) to rate HMOs as effective. Forty-five percent of employers in the East and 42% of those in the Midwest rated HMOs effective.

Employers (51%) continue to rate PPOs as an effective means of cutting costs. Many indicate that PPOs are more effective than HMOs. (See “Health care programs that have been effective in cutting costs,”)

Roger Adcock, vice president, finance and administration, Milard Group Ltd., Goleta, Calif., an autoparts distributor that employs 145 workers, says “Without question we are seeing savings in the order of 5% to 10% with our PPO. But with the indemnity, we’re seeing only increases,” he says.

The company currently offers employees a choice of a PPO or indemnity plan and may enhance its managed care network. “There is absolutely no question about not turning back. We will continue down the managed care road and explore other avenues next year. We may offer an HMO and, as part of our PPO, we will look toward more case management for serious illnesses,” Adcock says.

Employers that offer managed care are also including POS plans. The number of employers rating POS as “very effective” showed a significant increase over 1991 (60% versus 36%, respectively). However, the number of employers that responded that they offer POS plans was only nine.

After adopting various other strategies to contain health care costs, 53% of the employers say direct contracting is paying dividends and 52% say precertification for hospitalization for non emergency procedures is an effective means of cutting their costs.

Optimistic about wellness

Employers remain enthusiastic about wellness programs, even though they admit savings are difficult to quantify. Since 1989, three out of four employers responding to the survey have offered at least one form of wellness program. Of those polled this year, 35% say they are satisfied that wellness programs are an effective cost cutting tool. Last year, 27% of employers say wellness programs were effective at cutting costs.

Respondents report that they are still educating employees about the benefits of wellness as a preventive measure, while also providing a variety of wellness programs and facilities for their employees. Only 39% of companies concentrate on cancer screening programs and offer mammography as part of their wellness strategies. Fifty-two percent say such programs are “very effective”–that’s an increase of 12 percentage points over 1991 results.

Employers equipped with in-house gyms say the facilities are at least “somewhat effective.” Eighty-six percent say such facilities are somewhat to very effective, while 80% offering incentives to use an out-of-house employee fitness program say this strategy is “somewhat to very effective.” Health risk assessment programs are proving “very effective,” say 31% of respondents, while 36% say offering employee assistance programs for substance abuse is proving “very effective.”

Sixty-four percent of the respondents to the survey report that back injuries and back pain had a serious impact on their workforce, while 60% say cigarette smoking was a key health problem.

Stress and high blood pressure were also identified as problems that have a serious impact on the workforce. About 43% of respondents say their workforce was affected by alcohol abuse, and 39% identify high cholesterol and obesity as health hazards affecting their employees. Some 31% of respondents say mental health issues presented problems, 27% highlight drug abuse, while 21% say depression had an impact on their workforce.

Employers continue to show an interest in drug testing. In fact, 66% of the executives from manufacturing firms reported conducting drug tests on their employees.

A section of the survey questioned executives about the health insurance benefits their companies offer. The poll shows significant decreases in the number of employers offering long term disability coverage, dental plans, indemnity medical plans, short term disability coverage, and HMOs. According to the poll, 74% of employers offer long term disability–a decline of 10 percentage points over the figure for 1991. Short-term disability and indemnity plans had larger decline–17 percentage points and 15 percentage points respectively.

Retiree benefits

Employers remain troubled by the cost of providing retiree benefits and are taking a variety of measures to help contain costs. Among those that have taken measures, 55% say their strategy is not topromise health benefits to future retirees, while 42% say they are increasing retiree cost sharing. Thirteen percent of the respondents say they are cutting benefits provided to current retirees and dependents; 22% say they are moving to a defined contribution plan. In 1989, only 39% of companies had taken at least one of these measures to control retiree benefits costs. In 1992, the number of companies taking one at least of these measures was 47%.

One in five respondents indicate that they plan to take additional measures to deal with retiree benefits in the next two years. Of these, 40% of executives say they will increase retiree cost sharing, 36% say they will not promise health benefits to future retirees, and 40% say they will move toward a defined contribution plan. In addition, 43% of respondents say they will most likely cut the benefits provided to their current retirees and dependents.

To trim medical costs, 78% of respondents say they will increase deductibles, 76% say they will increase their employees share of premium costs, and 69% say they will increase copayments. Only 16% of respondents say they will cut employee medical benefits. Other popular options would be to drop traditional insurance and offer only a managed care plan (22%), institute a cafeteria plan (20%), cut retiree health benefits (10%), or cut dependent benefits (10%).

Looking to the future, most employers say that in the next three years the rising cost of health care benefits will be borne by employees (45%), or passed on by price increases to their customers (19%). About 36% of respondents say their organizations will pay for increasing costs from company profits.

Asked if they have a method to remove spouses and dependents from their company’s health benefits plan, 91% of respondents say they do not, and 89% say they would not institute such a plan in the next two years. This question was not asked in 1989 or 1991.

The B&H executive poll caught some employers in the final stages of preparing their facilities for the Americans with Disabilities Act, which becomes effective on July 26. Asked if they are ready to comply with the act, 73% of respondents say they were ready, 8% say they were not, and 19% say they were uncertain.

Just over half of the respondents expect to spend less than $10,000 to bring their companies into compliance with the ADA. This degree of spending is expected by more small companies (employing fewer than 1,000 employees), than larger employers (77% versus 26%, respectively). In fact, more than one third of the executive from larger companies expect to spend $50,000 or more.

Reducing mental health costs

According to the survey, employers are becoming increasingly concerned about the cost of mental health and substance abuse care and they are engineering effective managed mental health stategies.

Asked what strategies for cutting mental health and substance abuse costs have been the most effective, respondents say limiting the amount they spend is the most effective strategy (47%), followed closely by shifting costs to employees (46%). Redesigning benefits so that employees are encouraged to use outpatient, rather than inpatient services, proved popular with 43% of employers responding to the executive poll.

Other popular strategies for cutting mental health and substance abuse costs include instituting case management (28%), instituting an employee assistance program (27%), and starting utilization review (20%).

But the B&H poll reveals that 34% of employers still do not know how much their mental health and substance abuse costs rise annually. About 22% of respondents say their mental health and substance abuse costs are rising annually by less than 5%, and 16% say they incur annual increases that range from 6% to 10%.

Workers’ compensation

If employers are perturbed about the cost of mental health and substance abuse, they are even more concerned about the cost of workers’ compensation. The average executive estimated the increase at 14%. At the top end of the scale, 8% of employers say their annual rates of increase are more than 30%. Executives continue to voice concern about the rising cost of workers’ compensation.

To cut workers’ compensation costs, 65% of respondents report that they have established an injury prevention program, 57% are educating their employees, and 56% are auditing claims. Starting a light-duty return-to-work program is popular with 53% of employers, while 39% use preemployment screening.

Quizzed about what health insurance benefits their company currently offers, 74% of respondents say they offer a dental plan, 74% offer long term disability coverage that is either employer or employee paid, and 64% still offer an indemnity medical plan. Short term disability coverage is offered by 63% of respondents and 48% offer an HMO. Separate prescription drug programs are offered by 37% of respondents, and employee assistance programs are offered by 35% of survey respondents.

Still satisfied with PPOs, 33% of respondents offer such plans and 31% offer flexible spending accounts. Vision plans also remain popular, with 28% of survey respondents noting that they offer the benefit to their employees.

COPYRIGHT 1992 A Thomson Healthcare Company

COPYRIGHT 2004 Gale Group