A government association: vigorous competition.

Health-Care Cost Per Employee: $3,853

Health-care reform? It's happening now -- but through the marketplace, not an act of Congress. Payors are rapidly adopting managed-care techniques, and hospitals and physicians are coming together to form health-care networks that can compete on both price and quality. And consumers, payors, providers and employers increasingly have more information with which to make educated choices.

Despite these dramatic private-sector reforms, the media has focused almost exclusively on health-care reform efforts in Congress. At the Government Employees Hospital Association, we believe Congress will pass a health-care reform bill this year. At the very least, we think it will address insurance reform by eliminating health-underwriting and risk-selection mechanisms and by mandating some form of community rating. An employer mandate isn't out of the picture, either.

Tort reform is another issue on the congressional plate. As part of health-care reform, Congress may decide to cap damage awards in medical malpractice suits. Currently, about 75 percent of the medical malpractice suits that are filed don't result in any compensation to the plaintiff, but the large potential motivates people to file actions anyway. These legal costs and the defensive medicine practices they induce greatly inflate the cost of health care. Both health-care and tort reforms are needed and will go a long way toward reducing the population of uninsured and addressing the cost of health care in our society.

One troubling aspect of the Clinton health-care reform proposal is the degree of regulation to be left to the states. Many states are passing "any willing provider" laws, which require preferred-provider networks to accept any care provider who's willing to abide by their pricing constraints. These laws, along with mandated-benefits legislation, reduce the effectiveness of managed care by limiting the plan's ability to control quality, cost and utilization. If states continue to pass such legislation, which seems likely, they'll subvert private-sector efforts to reform the health-care system, just as these efforts are beginning to bear fruit.

GEHA is vitally interested in health-care reform, both on the legislative and private-sector levels. We're an association that provides health insurance benefits to federal civilian workers, and we compete with about 350 other organizations to provide these services. In 1993 we covered about 680,000 employees and dependents, with revenues of $1.3 billion. As an employer, we have 775 employees.

From 1983 to 1992, rate increases for all federal employees averaged 8.9 percent per year. By comparison, a recent Foster-Higgins study showed an average increase in health-care premiums of 12.6 percent in the private sector. In 1994, average rates for all federal employees increased only 3 percent. And GEHA didn't increase rates at all for its plan in 1994.

We attribute these smaller-than-average increases to the growth of managed care. Ten years ago, only about 15 percent of federal employees were enrolled in managed care. Today, virtually all federal employees are in managed-care plans, while that's true for only 40 percent in the private sector. Competition is vigorous, because employees can choose among many options, based principally on price and accessibility to plan providers. The federal government pays essentially the same dollar amount, regardless of the plan an employee chooses. Thus, an employee who chooses a more expensive plan has to pay the difference between that plan and less expensive options.

We offer a national PPO network, purchased from an outside vendor, to the workers we serve. The plan pays 90 percent of the participant's costs if he goes to a network provider and either 75 percent or 80 percent for a non-network provider, depending on the geographical region. The network includes a mental-health component, and the vendor provides utilization-review services, which are integrated into our internal case-management program. We cover preventive services, including routine physicals and cancer screenings.

In addition, we provide an optional managed-care dental program and are experimenting with an outreach program to offer various wellness services at selected federal worksites. Under this program, a registered nurse offers wellness services, such as blood-pressure readings, to GEHA members in conjunction with the site's health benefits officer. We're still evaluating the effectiveness of this program.

Our prescription-drug program has managed-care features, too, including strong economic incentives to use a mail-order pharmacy after the first refill of a prescription. Participants using a particular drug for the first time are required to pay a $15 co-payment for brand-name or $5 for generic drugs, and they receive a 30-day supply of the drug. But after the first refill, we strongly encourage them to use our mail-order service if they're going to use the drugs long-term. If they refill the drug for the second time at a regular retail pharmacy, the co-payment rises to 50 percent of the drug's cost.

On the other hand, if they use our mail-order pharmacy, they get a 90-day supply of the drug and pay only $20 for the brand name or $5 for the generic equivalent. The turnaround time is usually one to two weeks, and the prescription is delivered to the participant's home. Although our 1993 numbers aren't in at this writing, we believe this program cuts costs dramatically.

This emphasis on managed care extends to health care for our own employees. Self-insured and largely self-administered (with the help of two or three employees), we offer two PPO options and one HMO option, which isn't self-administered. We have wellness programs, too, such as stop-smoking and weight-control programs, aerobic-exercise classes and work-station ergonomics consultation, and we use a managed-care approach for workers' compensation claims. For our employees and our members, we're committed to managed care as part of comprehensive health-care reform.

by Fred Tromans Vice President-Administration and CFO Government Employees Hospital Association, Kansas City, Mo.