Consumerism to Re-Shape Health Insurance Plans; Milliman USA Survey Confirms Move to Employee Empowerment.

Business Editors/Health Writers

SEATTLE--(BUSINESS WIRE)--Sept. 24, 2002

The move to Defined Contribution/Consumer Driven (DCCD) health plans will likely become reality over the next few years. Beginning in 2003, expect employers to increase workers' share of health care costs, while also seeking to educate employees about making wise health care decisions.

These are among the findings from Milliman USA's 2002 HMO Intercompany Rate Survey. The annual survey is sent to more than 400 HMOs that serve the commercial market. It asks HMO executives how their client employers will respond to escalating health care costs, and how they think DCCD plans will impact employers, workers, providers and their own HMO operations.

"Employers are at a crossroads," says Steve Cigich, author of the Milliman USA survey. "With a soft economy and labor market, employers are more easily able to shift health care costs to employees, but they remain reluctant to take the big steps toward full implementation of DCCD plans. Successful DCCD implementation will require that these steps result in fully empowered employees making prudent health care decisions."

Employee empowerment, in the context of this and prior Milliman USA surveys, is defined as working knowledge of available options in the health care system and tools for assisting employees to manage their own care. Among the essential elements cited by HMO executives are Internet access for administration and information, and personal care accounts, whether Flexible Spending Accounts (FSA) or Healthcare Reimbursement Arrangements (HRA). Respondents see these as essential elements in a comprehensive DCCD approach.

While implementation will be phased in, a plurality of HMO executives predict a growing emphasis on DCCD plans within two years. In the meantime, HMOs view themselves as fairly well aligned to meet employer demands for increased cost sharing. The Milliman USA survey shows HMOs encouraged that employers generally view DCCD plans more positively than the current managed care approach to health insurance. In part, the HMO executives say, this is due to a shifting of responsibility to employees. Assessing cost, the HMO executives say their clients do not expect DCCD plans to cost any less than current managed care plans.

Concern about the need for education was a recurring theme. According to Milliman USA's Steve Cigich, "We expect to see employers take the time to educate employees while, at the same time, assess the right combinations of products and tools for each unique situation. We also expect HMOs to work with physicians on providing efficient and effective care."

The surveyed HMO executives said they believe employees will appreciate the freedom of choice provided by DCCD plans, but may not embrace the extra responsibilities attendant to making their own health care decisions. They also predicted that DCCD plans will not result in employees seeking more care or making radical lifestyle changes, such as quitting smoking or increasing exercise in order to directly reduce health care costs.

The complete findings of the 2002 Milliman USA HMO Intercompany Rate Survey will be generally available at the beginning of October. The data will include premium rates and trends by component, unit price and utilization data, physician reimbursement levels, medical expense ratios and profit levels. Results will be provided by metropolitan area, state, region and nationwide.

About Milliman USA

Milliman USA is a firm of consultants and actuaries serving the full spectrum of business, governmental and financial organizations. Founded in 1947, Milliman USA is located in 34 cities throughout the United States and in Bermuda, Hong Kong, London, Melbourne, Seoul and Tokyo. Milliman USA employs approximately 1,750 people, including a professional staff of over 700 qualified consultants and actuaries. Milliman USA is a founding member of Milliman Global, a global organization of consulting and actuarial firms. Additional information is available at www.milliman.com