6. If An HMO Is Dut, Shop For A Traditional Plan With Managed Care Or A PPO
Switching to a mannered-care health plan with built-in restraints on the use of health services should cut your costs by 5 to 10 percent.
The context health insurance you can buy is a traditional indemnity plan. Under such a plan, employees choose their physicians. Insurers, acting as a passive pass-through mechanism, reimburse doctors and hospitals on li fee for service basis. They also increase employer premiums as necessary to keep pate with rising costs. Many experts predict that traditional indemnity health insurance will be replaced by mariage-care indemnity plans by the mid-1990s. Mina ged-eare plans attempt to hold down costs by placing controls on the use of medical services.
Most insurance carriers already aller variety of managed-care features as additions to traditional indemnity plans. They include prior approval for elective hospital admissions, second opinions for surgery, utilization review, case management, and discharge planning.
A number of insurers also offer preferred-provider organizations (PPOs), which also may be organized by hospitals or sponsored by large employers. PPOs are groups of doctors who have agreed to discount their fees, usually by about 10 percent to 20 percent. By definition, PPOs build in managed-care fenturen to hold down expenses. To encourage use of PPO doctors, employees pay only a small fee of $5 to $10 per office visit. Employees my use doctors outside the PPO, but out-of-pocket expenses rise sharply with the addition of deductibles and coinsurance.7. Purchase Your Health Insurance Through A Business Group Or Coalition
Individual small employers have little or no lever age in buying health insurance, but when a number of small employers band together to purchase insurance they can wield real clout in the market.
The Small Business Service Bureau, an association based in Worcester, Mass.. arranges group insurance through HMOs and Blue Cross organizations for 35,000 small businesses most with fewer than 10 employees, across the country. We negotiate the terms of the benefits, and we have trained staff members who explain the options to small-business owners," says Lisa M. Carroll, health-services director.
Fred Rohm, president of the New Castle County Chamber of Commerce, in Newark, Del, manages a group-purchasing arrangement for seall employers in his area. Premiums for 350 small employers covered by the chamber's indemnity plan went up only 1 percent this year.
The chamber in San Francisco launched a group-purchasing arrangement in March. It lets small employers in the Bay Arel choose an indemnity plan, an HMO, or a PPO, Ask your local chamber or business association about group purchasing.
But we caution in signing up. Some insurance agents and many business trade associations offer group-purchase. ing plans known as multiple employer trusts (METS), "METS were everybody's answer to the problem of rising costs several years ago," says David Helms, president of the Alpha Center, health policy and planning center in Washington, D.C. But METR in general have not lived up to their cost cutting expectations, primarily because insurers lure away low risk groups with rock bottom rates, says Helms. This leaves the MET with higher-risk groups, which erodes its ability to negotiate low rates. Make sure the MET you choose is backed by an insurance company. Self-insured METS—those not backed by an insurer have experienced high failure rates.8. Purchase One Of The No-Frills Insurance Plans Now Available in Five States
Virginia, Missouri, Florida, Illinois, and Washington this year exempted small firms from regulations requiring them to provide certain types of health coverage. Typical mandates cover chiropractors, well-baby care, dental checkups, and treatment for alcohol and drug abuse. Some states require coverage for more exotie procedures, such as in vitro fertilization and acupuncture. By exempting small firms from such mandates, Insurers may offer no-frills plans with premiums costing 20 to 10 percent less.
"To prevent employers from canceling existing insurance, some states restrict the new. lower cont plans to companies that have been without insurance for at least a year. Call your state insurance commissioner for details. More states are expected to remove mandates for small companies next year.9. Determine if You Are Eligible For One Of The Low-Cost Pilot Projects Operating In 10 States
Pilot projects funded by the Robert Wood Johnson Foundation of Princeton, NJ have helped nearly 2,000 small businesses in 10 states purchase health insurance at sayings of 30 percent to 40 percent. The projects were designed to attract small unit: sured companies. Although these projects typically exclude firms that have offered group insurance within the past year, there are two notable exceptions-in Florida and Colorado.
The Florida Small Business Health Access Corp. in Tampu accepts firms that have gone uninsured for only six months. The corporation currently provides health services to 560 small businesses covering 2,856 individuals. It uses state funds to subsidize marketing and administration. That lowers the cost of premiums employers pay to enroll their workers in a local HMO, A 35 yer old adult male pays $75.52 a month for the standard option plan; family coverage is $198.96.
Eighty percent of the companies enrolled have three or fewer employees. says Rod Sailors, the corporation's director. The legislature more than doubled the plan's subsidy this year to $4.7 million permitting it to expand into 11 rural counties by next June.
In Denver, the Shared Cost Option for Private Employers (SCOPE) accepta small companies seeking to switch to s lower-cost health plan, as well as those currently uninsured. SCOPE, in operation less than a year, is providing health Insurance to 171 companies covering 4,296 individuals.
SCOPE's health plan is the only project funded by the Robert Wood John son Foundation that operates without a government subsidy. It cuts premium costs by requiring relatively high deductibles and coinsurance (the percentage of costs not covered by insurance) and by relying on a select group of doctors and hospitals. Routine visits to a doctor's office require a $15 payment. Hospital admissions require an individual to pay a $250 deductible plus half of the first $5,000 in charges. But the plan also covers a wide array of preventive Care at no charge.
The high enst-sharing with employees allows U.S. Life Insurance Co., the Neptune, NJ.. insurer offering the plan to keep rates low. A single 31+ year-old male pays $18.91 n month: family coverage is $148.47. "In the first five weeks of the plan]. 8,000 businesses called for information," says Judith Glacner, SCOPE's director.
Other Robert Wood Johnson Foundation health-care pilot projects are those operating statewide in Michigan, Tennessee, Utah, Washington and Wisconsin as well as those in Tucson, Ariz Brunswick, Maine and San Francisco.10. Seek Out New, Low-Cost Plans Offered By Some Insurers
The low-cost health-insurance plan offered by U.S. Life Insurance through the SCOPE program in Denver already has inspired similar plans, says David Dunn, a senior vice president of U.S. Life. Just because of SCOPE, most of the carriers in Denver have tried to design similar products to appeal to the same market," says Dunn.
He has encouraged other insurers to copy the plan and offer it elsewhere. A number have shown some interest in doing so. Blue Cross and Blue Shield organizations also have launched a number of low-cost plans designed for small companies and the uninsured. Blue Cross of Tennessee offers a comprehensive, nongroup program called Impact, for employers with four or fewer workers. Premiums for individuals start as low 18 $28.13 a month.
Blue Cross and Blue Shield of Oregon offers a PPO for small groups. Premiums ire about one-third less than those of regular Blue Cross plans. there are, of course, other ways to eat health-care costs. The additional options that follow are common among midsized and larger companies yet are within the reach of many small firme:
- Start a wellness program that promotes healthful behavior. By some estimates, about one-half of nll health problems are related to lifestyle choices such as smoking and neglecting to get ?r???r ?x?r?
Explore the feasibility of using a mail-order prescription drug program if you have employees who need large quantities of high-cost maintenance dngs, Mail-order pharmacies do a high volume business and offer unit prices based on that volume. They are often more aggressive in providing lower cost generic drugs, which can be a cost saving in itself when appropriate.
Eliminate mental health and drug dependency care from your health plan, and contract for this coverage separately, using a quality managed-care company that specializes in these services. This strategy can save you 10 to 40 percent of your health-care costs
. Mental-health and drug-dependency care are the fastest growing segments of medical plans today. Experts say that much of the treatment now provided is inadequate or unnecessary.
- Offer a cafeteria-style benefits plan. Cafeteria plans allow employees to tailor their benefits to their individal needs, and they also enable employers to establish limits on company contributions.
For small companies, the frontier in health-care cost management lies in direct contracting with doctors and hospitals. Fred Rohm, of the New Castle County Chamber of Commerce, is eager to test how well this works. Although his plans are still in the formative stage, Rohim knows what he wants:
health center staffed with salaried doctors who would provide basic services to employees and dependents of hundreds of small companies in his area. Patients would receive routine care at the center, including X-rays and laboratory tests. As necessary, the staff doctors would channel patients to outside specialists who would work for discounted fees. Hospital treatment would be paid according to a set fee schedule reflecting significant reductions from sual charges.
I think we can sell the plan if we can price it at 360 to $75 per month per individual," says Rohm. That's about 40 percent to 50 percent less than the typical health-insurance plan.
Rohm is negotiating with JSA Health Care Corp. of Columbia, Md, to set up the proposed health center. JSA is one of a handful of companies nationwide breaking into the business of setting up health centers with company doctors for corporate clients.
Joseph L. Falkson, JSA's director of primary health, says the company currently runs seven similar health centers for dependents of US military personnel, and those centers have succeeded in holding down costs. We have calculated that between 1986 and 1989, we had 1 million patient visits at the centers," he says. "Our estimate is that we saved the military $40 million over what it would have spent if our patients had been purchasing typical fee-for-service medical care."
Company health centers represent just one approach for solving the health-care problems faced by American business. Clearly, there is no one solution best for all, but there are many small ways in which individual companies, business groups, insurers, and government can chip away at the problems today while contributing to a lasting solution for the future.
Time will tell whether any of the recent innovations in health-care delivery will lend the way out of the current Crisis. But workable solutions need to be developed sooner rather than later. The nation's employer-based health-insurance system can't take too many more years of 20 percent price increases.