HEALTH INSURANCE IS AILING EMPLOYERS, BUT WHAT ARE THEY DOING
TO CURB RISING HEALTH CARE COSTS?
NEW YORK, Nov. 18 /PRNewswire/ -- As the trend toward employer- sponsored managed care programs grows at a dramatic pace, a recent study finds that employers may be getting more value for their premium dollars -- but not the expected cutback in health care costs. Half of the country's workers (in companies with more than 200 employees) are currently enrolled in managed care programs, an increase from 29 percent in 1988, according to the study by international accountants and consultants KPMG Peat Marwick.
The study reports that even though employers are strikingly less satisfied with their health benefits than they were three years ago, they aren't planning major changes to their benefits plans. In the immediate future, however, American workers can expect more managed care, utilization management, modest increases in cost sharing, and restrictions in mental health benefits.
"This is one of the first nationwide studies to gauge employers' experience with managed care programs," Peat Marwick's Roy Oliver, national practice director of compensation and benefits practice, said today. "The survey found that managed care programs, which channel employees to cost-effective providers and negotiate fair prices with them, are adding more value to employee health care services but are not providing employers with much financial relief from mounting costs. health maintenance organizations (HMOs) and preferred provider organizations (PPOs) have spent their savings on broader benefits and reduced cost sharing."
The following are highlights of Peat Marwick's survey of employer- sponsored health benefit plans at more than 1,000 private and public companies.
The Cost of Health Insurance, a Chronic Concern
-- The cost of employer-sponsored health benefits rose 11.5 percent between 1990 and 1991 -- the lowest rate of increase since 1987. Premiums in 1991 were about 50 percent higher for conventional and PPO single coverage than in 1988. Family coverage was about 65 percent more expensive today than just three years ago.
-- Among companies offering conventional (traditional indemnity) plans, one of every five employers experienced no change in premiums and 6 percent enjoyed a decrease. Plans that experienced a decline in premiums often had switched carriers in the past year. For companies whose premiums increased, the average was 18 percent.
-- On average, premiums increased at a similar rate for conventional and managed care plans (health maintenance organization and PPO plans). Conventional plans' premiums increased at 12 percent, HMOs at 12 percent, and PPOs at 10 percent.
-- Employee cost sharing has increased since 1988. The percentage of workers with single conventional coverage who did not contribute for their premiums declined from 52 percent to 35 percent in the past three years.
-- Self-funding increased in both conventional and PPO plans between 1988 and 1991, particularly among larger companies. For conventional plans, the percentage of large companies (1,000 to 4,999 employees) choosing to self-insure grew from 83 to 90 percent and among very large companies (5,000 or more employees) the increase was from 81 to 97 percent. A factor encouraging self-funding is state mandated benefits. States have passed more than 700 laws mandating that insurers cover the services of either specific providers, services or populations. Unlike fully insured plans, self-insured plans have the option of complying with these mandates.
-- The total cost for single monthly coverage averaged $139 for HMOs, $145 for conventional plans, and $150 for PPOs. Family coverage averaged $355 for conventional, $350 for HMO plans, and $376 for PPO plans.
"Assuming an overall inflation rate of 4 percent and a continuation of the health care cost trend for the past three years," said Peat Marwick's James Buckley, national director of group insurance, "the monthly cost of family coverage in the year 2000 will be $1,107. If workers' wages remain stagnant, as they have been, the cost of health benefits will equal one-half of workers' earnings."
Enrollment in Conventional Plans Dropped Drastically
-- Enrollment in conventional plans without preadmission certification programs fell from 22 percent of covered workers in 1988 to just 10 percent in 1991. ONe reason enrollments in conventional plans have fallen is that fewer employees had the option of choosing a conventional plan. In 1988, almost 90 percent of covered employees were offered conventional plans; now in 1991, only 71 percent of employees were offered them.
-- In conventional plans, deductibles are one-third higher, and employers have reduced the maximum lifetime benefits and raised employee out-of-pocket limits.
-- The percentage of workers offered PPO coverage grew from 21 percent to 41 percent in 1991.
-- HMO subscribers are as satisfied -- or more satisfied -- with the quality of care, cost and benefits covered than are conventional fee- for-service subscribers. PPO subscribers' satisfaction with cost, access and quality more closely resembles conventional enrollees.
"Employee acceptance of managed care programs has made its growth possible," observed Oliver. "Managed care protects employees by reviewing the quality of their medical care and assuring that a patient receives appropriate treatment. Americans should not regard cost control and quality as tradeoffs -- more is not necessarily better. Based on medical record audits, a number of studies published in the New England Journal of Medicine concluded that a minimum 15-20 percent of medical procedures are inappropriate."
Utilization Management Weeds Out Unnecessary Procedures:
Employers Control Costs
-- As medical costs continue to rise faster than inflation, employers and insurers are turning to utilization management companies to review the physicians' treatment plans to help determine whether insurers should pay. Utilization management, which traditionally focused on inappropriate treatment in inpatient settings, now examines costs outside the inpatient setting as well. For example, about 40 percent of employees in conventional plans and 50 percent in PPO plans are subject to outpatient precertification programs.
-- Forty-six percent of employees in PPO plans and 25 percent of employees in conventional plans bear a financial penalty for inappropriate use of an emergency room.
-- Utilization management grew significantly among conventional plans. In-patient preadmission reviews now cover 81 percent of employees in conventional plans, up from 68 percent in 1988. High-cost case management grew more rapidly than preadmission certification in both conventional and PPO plans and now covers 80 percent of conventional and 90 percent of PPO enrollees.
"Utilization management continues to grow because it continues to demonstrate cost effectiveness," observed Buckley. "Since roughly 2 percent of Americans account for almost 40 percent of health care expenses, high cost case management's growing popularity is easy to understand. To maintain its cost effectiveness in the future, utilization management will be pressured into becoming more and more sophisticated in managing health care resources."
For further information about the study, or to receive a copy of the executive summary, write to Jon Gabel, KPMG Peat Marwick, 2001 M Street, N.W., Washington, D.C. 20036-3310.
KPMG Peat Marwick provides accounting, auditing, tax, and management consulting services to leading business, governmental, private institutions, and individuals through 135 offices in the United States. It is the U.S. practice of KPMG, which has operations in more than 120 countries and posted 1990 revenues of $5.4 billion.
/CONTACT: Lisa Meyer of KPMG Peat Marwick, 201-307-7763/ CO: KPMG Peat Marwick ST: New York IN: INS HEA SU: ECO GK-FC -- NY017 -- 1308 11/18/91 10:09 EST