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Self-insureds report 18% rise in health benefit costs.

Self-Insureds Report 18% Rise in Health Benefit Costs

Self-insured employers reported an 18 percent average increase in health benefit costs from 1988 to 1989, according to a survey released by the Self-Insurance Educational Foundation, an affiliate of the Self-Insurance Institute of America (SIIA). Nearly one-fifth of survey respondents, however, reported increases of more than 25 percent.

The survey, which was released at SIIA's recent legislative conference, polled SIIA members to determine their experiences with health care cost containment for medical benefits and workers' compensation. It was conducted at SIIA's annual conference in October.

The survey found that managed care programs, which include utilization review and health maintenance organization/preferred provider organization delivery systems, are the most prevalent strategy used by self-insured companies to control rising costs. Survey participants also identified retiree medical plans, continued refinement of diagnosis-related groups payment systems and development of flexible compensation programs as the most critical challenges facing self-insureds in containing medical benefit costs.

"The results of this survey will be instrumental in helping SIIA and its members contribute to the reshaping of state and federal health care policy in the coming year," said James A. Kinder, executive vice president of the institute. "Through the repeal of Section 89, Congress has demonstrated its willingness to respond to the concerns of employers. We look forward to sharing this study with legislators and other health care policy advisers and hope that they will view it as an important indicator of how self-insured employers are coping with the health care cost crisis."

Survey respondents include self-insureds, third-party administrators and insurance companies. Firms represented range in size from less than 20 to more than 10,000 employees.

Among the principal survey findings, the average annual cost of providing health care benefits per employee during 1989 was $1,881. The cost of providing dependent coverage was significantly higher, averaging $2,253 per dependent.

Of the respondents, 90 percent offer comprehensive major medical plans to their employees, and 55 percent a basic plan plus major medical. Nearly two-thirds offer a PPO option and one-third an HMO.

Although managed care was found to be the most popular measure used to control costs, increased deductibles, co-pays or increased deductibles, co-pays or increased coinsurance factors are used by 36 percent of the respondents, and nearly one-fifth have made changes in benefit plan designs. Thirteen percent reported that they had reduced the level of medical benefits, and 8 percent reported using flexible benefit plans.

Seventy-five percent of the respondents use a utilization review program to contain medical care costs. Virtually all these plans include pre-certification of elective hospital admissions. More than 85 percent include concurrent review.

Two-thirds of the utilization review programs include a mandatory second surgical opinion. Outpatient utilization review and voluntary second surgical opinion were each mentioned by nearly 40 percent of the respondents.

Of the utilization review strategies employed, medical case management was reported as being the most effective in moderating medical plan costs. Pre-certification and concurrent review also were judged by the respondents as being effective ways of moderating health care costs. Four-fifths of the surveyed firms used a utilization review provider, with the balance using a commercial insurance carrier.

Workers' Comp

Fewer participants responded to the questions on workers' compensation. Those respondents reported a rise in the number of workers' compensation claims, with occupational injuries cited as the most influential factor affecting this increase. More than two-thirds of those respondents also reported rising costs due to workers' compensation claims, principally caused by rising health care costs and increases in insurance premiums.

The programs being used to control workers' compensation medical costs involve loss prevention, safety, cost containment, medical case management and fitness. The two most widely used health care cost control mechanisms integrated into workers' compensation programs are rehabilitation services involving medical case management, and vocational rehabilitation and hospital bill review.

The survey was underwritten by Intracorp, a provider of health care cost control and disability management services. A copy of the report can be obtained from SIIA by calling (714) 261-2553. The report, available to SIIA members at no charge, costs $20.
COPYRIGHT 1990 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Publication:Risk Management
Date:Mar 1, 1990
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