One of the biggest complaints from employer sponsors of health benefits is how HMOs blind employees to the true cost of health care.
Low patient copayments and no claims combine for a very distorted cost of care.
Employees may be forced into reality.
A 2012 survey by Aon Hewitt revealed the following.
- An increase in consumer-driven health plans (CDHPs)
- CDHPs were the second most common plan design offered by employers
- Preferred Provider Organizations (PPOs) remain #1
- HMOs dropped to #3
The pie chart below illustrates the survey findings of nearly 2,000 U.S. employers, representing over 20 million employees and their dependents with 2011 data.
Back to Basics
For those of you who are unfamiliar with the different plan designs, the following is a brief explanation and history lesson.
Health Maintenance Organizations (HMOs) developed as a way to manage health care costs and improve access to care. Sound familiar?
That was the plan. In the early days ~
- Health care providers received a fixed monthly fee (capitation) for members
- Members enrolled in the plan and selected a Primary Care Physician
- Except for emergency care, benefits applied only when care was received or referred by the member’s Primary Care Physician
HMOs were at the heart of health reform long before President Obama entered the picture.
The HMO Act of 1973 expanded the growth of HMOs.
- The Act provided federal funding for HMOs
- Removed state laws that banned prepaid plans
- Required employers with at least 25 employees to offer a federally qualified HMO – if requested
And then, the you-know-what hit the fan and the HMOS today are not what they were in the explosion of HMOs in the 1990s.
A Preferred Provider Organization (PPO) is a network of independent medical physicians, hospitals and other health care providers contracted to provide services for a discounted fee.
Introduced in the 1980s, PPOs were a less restrictive alternative to HMOs.
The following are typical features of a PPO.
- Enrollees are not required to select a Primary Care Physician
- Members choose at the time of service whether to use a network or non-network provider
- In-network care typically receives a higher level of benefits and lower out-of-pocket costs for the member
For many employers, PPOs were a baby step towards accountability for employees.
Employees still didn’t have enough skin in the game to change behavior.
The lofty goal of CDHPs was to treat health care like any other commodity.
- Decision-making should be in the hands of the consumer
- The individual should make his or her own decision based on cost, quality or convenience
There are many forms of CDHPs. The following are common characteristics.
- The health plan has a relatively high deductible
- Preventive care is typically covered with minimal out-of-pocket expense
- Plans may have a savings account for health care expenses
- Contributions to the savings account may be tax-free
With these plans, the individual (the consumer) decides how to use the health care funds.
Not Beating Down the Door
Try as they might, employers still have not convinced employees to take health care into their own hands.
According to the survey, CDHP enrollment lagged behind other plan designs.
There are some real stumbling blocks with CDHPs.
- Employees don’t understand them
- Employers don’t spend enough time for education
- Employees have no reason to change
Historically, our health insurance works on a premise (in essence) of rewarding disease.
- You get sick
- The insurance company pays your claim – usually
Why would you switch to a CDHP where you have a higher deductible to satisfy before you get paid for being sick?
As one of my clients explains – there needs to be a shift in thinking (and action) where health benefits manage health – not disease.
- Employers are incorporating wellness programs into health benefits
- Many provide incentives for employees to take an active role in their health
Until there is that shift in how we view health benefits, the blinders are staying in place.
Notice of Disclaimer –Cathy Miller is not an attorney or health care provider and cannot provide legal or health care advice. The information provided is for your general background only, and is not intended to constitute legal or health care advice as to your specific circumstances. We recommend you review legislation with legal counsel and visit your physician for health care issues.