ef 4 D Table 2 Table 1 annual growth rate from 12 percent to 5 percent. Surveys of their employees follnd found that low-income individuals with lower coinsurance rates experienced health of rateheal increases, th care providers and the state that introduced is intended a standard to provide benefits health package care services in 1993, in the requiring most Committee Summary on Ways and Means million enrollees. _ By 1994, there were 547 HMOs, with 43.4 million enrollees. _ Percentage of Surveyed Employers with Utilization Review Programs 6U.S. Congressional Budget Office, "The Subcommittee Effects of Managed on HCare ealthand Managed Competition," CBO that they were generally satisfied for Traditi with onalthe Indemnity system o Plan nces, they understood it. specific gains for high blood pressure, myopia, and dental problems--three efficient Memorandum, copayments settings. Feb of rua its ryemployees. These 1995. Percentage interventions of Employers not With only Cosbinclude Sharing the Provisi movement ons, of T-99 These plans range from staff models where the HMO owns its health care facility 1989-1992 by Level of Cost Sharing and Year Employer Experience at Managing Health Care Costs • Employers' use of cost management strategies in health care has become more prevalent chronic conditions that are relatively inexpensive to diagnose and treat. If individuals into health mainte_,ance for Traditional o In rganizations demnity Plans, (HMOs) 1989-1992 but also include 7Danae A. Manus, Robert J. Strub, ant 4 Fhomas R. Werner, "The Cincinnati Initiative," Managed Care and employs health care providers on a salaried basis, to independent practice prevalent as a result of the growth in employment-based health insurance, third Type of Program 1989 1990 1991 1992 Quarterly (Winter 1994): 20-26. Conclusion Coalitions and Cooperatives individuals party reimbursement, choose to forego and ptechnological reventive careadvances. and intervention Responding services to rising because health of increased employee contributions for health insurance premiums and increased cost arrangements (IPAs), where groups of physicians practicing independently contract Precertification of Elective Admissions 73% Statement 81% 81% 83% Individual Deductible care costs, employers have moved to managed care, which can be defined as any Introduction Concurrent Review 52 65 65 66 Related Amount EBRI Publications 1989 1990 1991 1992 In 1991, Cincinnati Bell, General Electric Aircraft Engines, Proctor and sharing high costin sharing, traditional theyfee-for-service run the risk ofhealth necessitating insurance. more costly services in the The health care delivery and financing system is evolving rapidly. There with an HMO to provide health care services to the HMO enrollees. The recent type of intervention in the provision of health care services or reimbursement of Catastrophic Case Management 55 65 67 69 health care providers that is intended to provide health care services in the most $100 or less 40% 38% 34% 29% OutpatientGamble, Utilization and Review the Kroger Company 19 formed a20 health care 19 coalition22 to increase movement future. Thisofmay individuals have the into effect HM of Osincreasing has not been total into healththecare more expenditures controlled and staff or "The have Future been of changes Employment-Based in the way Health healthBenefits." care is EBRI financed, Issue Brie the f no. types 161 (Employee of treatments Benefit Before the efficient setting. Second Surgi $150 cal Opinion 15 15 89 88 15 82 13 71 Research Institute, May 1995). Mr. Chairman and members of the committee, I am pleased to appear before you bargaining $200 power for 29 discounts with 27 area hospitals, 28 monitor28 quality improvements, Pr utilization emium and because Cost individuals Sharing may be sicker once they seek treatment for a health Mandatory available, a the sites of care, and the 59 physician-patient 55 relationship. 49 45 These changes group model HMOs but into the IPAs, where patients have a greater choice of Over $200 11 House Ways 18 and Means 23 Committee 26 • Firms have been increasingly requiring workers to contribute to health Sarah Snider, and Paul Fronstin. "Sources of Health Insurance and Characteristics of the Uninsured: Voluntary b 30 33 33 26 this morning to discuss employer responses to rising health care costs. My name is Subcommittee on Health and search for other ways to control costs. Annual savings in the Cincinnati area None of problem. These 9 7 8 7 Analysis have resulted Firms of the have 1994 primarily Cur been rent increasingly from Population reactions Survey," requiring to EBRI health workers Special careReport cost to contribute SR-28 inflation, /Issue Brief and to health no.158 employers' insurance premiums. In 1979, employers fully paid for single coverage health physician. Between 1993 and 1994 there was a 42.6 percent increase in enrollment in (Employee Benefit Research Institute, February 1995). insurance for 73 percent of full-time workers employed in medium and large Paul Fronstin. I am a research associate at the Employee Benefit Research Institute Coinsurance Rate for have been estimated at $75 million for all private and public payers of health care insurance experiences premiums in managing and health subjecting care them costs to have direct varied out-of-pocket with the methods provisions.chosen. In Source: mixed A. Foster models, Higgins followed & Co., Inc., by Health a 7.6 Care percent Benefits increase Survey (Princeton, in enrollment NJ: A. Foster in IPAs. HigginsGroup- & Co., Inc., 1990- private establishments. By 1993, only 37 percent of workers had their coverage Inpatient Care 1989 1990 1991 1992 Paul Fronstin. "The Effectiveness of Health Care Cost Management Strategies: A Review of the 1993). Hearing on (EBRI), fully apaid nonprofit, for. nonpartisan, public policy research organization based in Utilization Review because of a 5 percent decrease in the average charge per patient and a 10 percent 1979, employers fully paid for single coverage health insurance for 73 percent of full- Evidence." We can expect EBRI Issue to observe Brief no. 154 a continued (Employee Benefit increase Resea in rchcost-sharing Institute, October responsibilities 1994). of based plans, i.e., staff, group, and network models, experienced a decline in aFor specific procedures. 0% 23% 25% 27% 25% bFor all Washington, procedures. DC. EBRI has been committed, since its founding in 1978, to the 10 7 5 4 4 decrease • There in hasthe been average an increase hospital inlength the cost-sharing of stay. 7 provisions of traditional fee-for- time workers Employers employed have increased in mediumtheir anduse large of utilizati private onestablishments. review (UR) programs By 1993, only Paul workers, Yakoboski, the monitoring et al. "Employment-Based of care, theHealth movement Benefits: of Analysis workersof the andAptheir ril 1993 dependents Current enrollment between 1993 and 1994. New evidence suggests that HMOs reduce use of 15 2 2 2 2 Experience in Controlling Costs & Population service Survey." health EBRI insurance. Issue BriefBetween no. i52 (Employee 1989 andBenefit 1992,Research more workers Institute, August were subject 1994). to accurate statistical analysis of economic security issues. Through our research we 20 62 65 63 65 Coalitions have also been formed in Denver, CO; Memphis, TN; Cedar (table 2). These programs are designed to monitor the progress and appropriateness 37 intopercent managed of workers care arrangements, had their individual especially coverage those that fully offer paid greater for. In choice 1979,of health care services by Improving an averageQuality of 8 percent, in Employer-Based compared with Plansservices that similar higher deductibles, higher coinsurance rates, and higher out-of-pocket 25 a 2 1 1 "Themaximums. Changing Health Care Delivery System: An EBRI/ERF Policy Forum." EBRI Issue Brief no. 148 strive to contribute to the formulation of effective and responsible health and Rapids, IA; Houston, TX; Minneapolis, MN; Kingsport, TN; and many other cities_ employers of health care fully services paid for on family a case-by-case coverage basis. healthIn insurance 1992, 83 percent for 54 percent of surveyed of full-time (Employee physician, Benefit such Research as IPAs, Institute, PPOs, and April POS 1994). plans, and the formation of employer patients would be expected to use in a traditional fee-for-service indemnity plan. _ Coinsurance Rate for retirement policies. Consistent with our mission, we do not lobby or advocate by • Employers have increased their use of utilization review (UR) programs. These The activities of these coalitions have varied greatly, including the selection of workers employers Physician employed Visits required in 1989 prior medium authorization and 1990 large for private certain 1991 establishments. procedures 1992 , nonemergen By 1993, c only y 21 William coalitions Custer. to negotiate "Health Care forReform: volumeExamining discountsthe for Alterhealth natives." care EBRI services. Issue Brief no. 147 However, staff and group model HMOs were shown to reduce services by nearly 20 programs are designed to monitor the progress and appropriateness of health (Employee Benefit Research Institute, March 1994). specific policy solutions. I would ask that my full statement be placed in the record. 0% 8% 6% 6% 5% Paul Fronstin, Research Associate preferred providers on the basis of efficiency, assistance in the purchase of percent hospital of admissions workers , had and their elective family surgery coverage , up fully from paid 73 percent for. 2 in 1989. In 1992, 66 careThank servicesyou onfor a case-by-case the opportunity basis.to testify this morning. I'll be glad to answer percent, and IPAs reduced use by art average of 0.8 percent. 10 6 5 4 4 Employee Benefit Research Institute Currently a majority of workers receive health insurance through their 15 2 2 2 2 cardiovascular percent of employers care, the required provision health of mental care to health be monitored and substance as it wasabuse provided programs and/orat any questions There has you also may been have. a simultaneous increase in the cost-sharing provisions of • The use of HMOs has been one of the most prevalent methods utilized by 20 77 84 82 83 employers. _ In addition, over 60 percent of nonelderly Americans participate in an employers to control rising health care costs. In 1980, there were 236 HMOs, with 25 a 2 1 1 reduced rates, the enactment of healthy lifestyle programs for adults and children, traditional determined fee-for-service the length of health a hospital insurance stay and (table the 1). scope In of 1992, the 26 treatment percent prior of surveyed to Preferred Provider Organizations and Point-of-Service Plans Washington, D.C. 9.1 million enrollees. By 1994, there were 547 HMOs, with 43.4 million enrollees. employment-based health plan. The employment-based health system has been andRecently, the provision the largest of small increase business in enrollment insurance options. occurred in These mixed coalitions model are HMOs and employers treatment Employee , required up from a 52deductible percent in of 19over 89. S $200, econdupsur from gical 11 opinions percent in were 1989. the In only 1992, type 65 1 In 1993, 54.2 percent of workers aged 18-64 received health insurance coverage from their employer. Preferred provider organizations (PPOs) and point-of-service (POS) plans Out-of-Pocket See Sarah Snider and Paul Fronstin, "Sources of Health Insurance and Characteristics of the Uninsured: independent practice arrangements. Group-based plans, i.e., staff, group, and evolving since World War II, with employers being very active in the development of Maximums UR whose use decreased 1989 between 1990 1989 and 1991 1992. Studies 1992 have found that UR is successful in reducing expenditures on health care because they create a competitive percent of employers required coinsurance of 20 percent for inpatient care, up from Analysis have also of the emerged March 1994 as strong Current alternatives Population 16 May Survey," to fee-for-service 1995 EBRI Special Report plans SR-28 and /Issue HMOs. BriefThe no. 158 network model HMOs, experienced a decline in enrollment between 1993 and (Employee Benefit Research Institute, February 1995). 1994. and implementation of cost management strategies. <$1,000 35% 37% 30% 28% market with sound economic principles such as volume purchasing and 62 an percent effective in mechanism 1989. In 1992, for 83 controlling percent of health employe care rs costs required and coinsurance utilization. One of 20 study number of individuals enrolled in these arrangements increased significantly $1,000-$1,499 38 37 39 38 2 U.S. Department of Labor, Bureau of Labor Statistics, Employee Benefits in Medium and Large Finns, • Preferred provider organizations and point-of-service plans have emerged as competitive bidding. $1,500-$2,499 21 20 24 26 percent found that for physician UR loweredvisits, hospital up from expenditures 77 percent by in 11.9 1989. perIn cent 1992, , total 26 percent medical of between 1979-1989 the (Washington, mid-1980s DC:and U.S. today. Government Recently, Printing the Office, growth selected rate yea of rs); enrollees Employee in Benefits these in $2,500-$4,999 strong alternatives 4 to fee-for-service 5 plans and 6 HMOs. The 6 number of Medium and Large Private Establishments, 1991 and 1993 (Washington, DC: U.S. Government Printing Cost Management Strategies ]he views expressed in this statement are solelv those of the author and should not be attributed to the $5,000+ States have responded 2 to growin 2 g health2 care costs not 2 only as government employers expenditures limited by 8.3 out-of-pocket percent, hospital expenses admissions to between by 12.3 $1,500 percent and , $2,499, and inpatien an increase t days Office, individuals 1993 and 1995). enrolled in these plans increased significantly between the mid-1980s plans has exceeded the growth rate of enrollees in HMOs because they allow greater Employee Benefit Research Institute, its officers, trustees, sponsors, or other staff. The Employee Benefit and today. Recently, the growth rate of enrollees in these plans has exceeded the Research Employers' Institute is a use nonprofit, of cost nonpartisan, management public policy strategies research o in rganization. health care has become entities but also as employers. The California Public Employees' Retirement System from by Sour8 ce: percent. 21 A. percent Foster 3 Higgins in 1989.& Co., Inc., Health Care Benefits Survey, Report 1: Indemnity Plans: Cost, 3 choice Paul J.of Feldstein, physician. Thomas Evidence M. Wickizer, on the and savings John R.C. from Wheeler, these "Private plansCost is largely Containment: lacking The but growth rate of enrollees in HM©s because they allow greater choice of physician. Design and Funding (Princeton, NJ: A. Foster Higgins & Co., Inc., 1990-1993). Effects of Utilization Review Programs on Health Care Use and Expenditures," New England Journal of more prevalent as a result of the growth in employment-based health insurance, (CalPERS) has had success with its own purchasing cooperative for health care Evidence suggests that increased cost sharing does reduce health care costs does suggest there is a potential for savings. For example, AT&T was able to reduce Medicine (May 1988): 1310-1314. • Employers have formed health care coalitions to increase bargaining power for aData not available. third party reimbursement, and technological advances. Responding to rising HMOs services. discounts CalPERS with experienced area hospitals,premium monitor decreases quality improvements, in both 1994 and and 199 search 5 by for and utilization. The RAND Health Insurance Experiment found that individuals its annual growth rates for medical expenses from 12.9 percent in 1991 to under 5 4 Nancy Kraus, Michelle Porter, and Patricia Ball, Managed Care: A Decade in Review 1980-1990, other ways to control costs. These coalitions are successful in reducing (Excelsior, MN: The InterStudy Edge, 1991) health care costs, employers have moved to managed care, which can be defined as negotiating more aggressively with health care providers, asking HMOs to forego enrolled The in health use of plans HMOs with has a been 25 percent one of the coinsurance most prevalent rate had meth 15 ods percent utilized lower by per percent in 1992 because they moved their workers into POS plan. In 1991, the Pacific expenditures on health care because they create a competitive market with sound 5 The economic InterStudy principles Competitive such Edge, as 5.1 volume (Minneapolis, purchasing MN: Interand study, competitive 1995). bidding. any type of intervention in the provision of health care services or reimbursement capita employers costs to than control individuals rising health in plans carewith costs.no In coinsurance. 1980, there were The RAND 236 HMstudy Os, with also 9.1 Telesis Group moved their fee-for-service enrollees in POS plans and reduced its