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More Employers Turn to Disease Management

September 26, 2007
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Nearly all large employers provide health benefits; more than half of small employers do not. And the difference in size and sophistication largely determines an employer’s ability to control health care costs.

The most popular means for doing so, at least as reported in a recently published report by the Kaiser Family Foundation and Health Research and Educational Trust, is to manage the health of employees—something that large employers are turning to in increasing numbers.

According to the annual report released September 10, some 35 percent of large employers (those with 200 or more employees) find disease management programs to be “very effective,” with another 50 percent saying they are “somewhat effective.”

Small employers (three to 199 employees) are also turning to disease management, but in smaller numbers. Twenty-eight percent say it is “very effective” in controlling costs, while 43 percent say it is “somewhat effective.”

The difference in opinion between small and large employers, says report co-author Gary Claxton, reflects the ability of large employers to marshal resources needed to manage the particular yet complex health needs of a unique group of people.

Blaine Bos, a senior consultant for Mercer, says small employers are often stuck with off-the-shelf disease management packages when a tailor-made approach is necessary.

“Very large companies typically have resources to hire someone for whom care management is a core service,” he says.

Small companies, meanwhile, purchase disease management as part of their health insurance. With a less focused approach, participation rates are lower.

The result, revealed in this year’s Kaiser survey, is a widening gap between large and small employers that offer health care—one that comes at a time when health care premium increases are at their lowest level in eight years.
 
In 2007, health care premiums rose 6.1 percent, down from 7.7 percent in 2006 and a high of 13.9 percent in 2003. Many experts believe the lower increases are a result of competition among health insurers for an ever-shrinking pool of insured people, and that the cost is likely to go up next year.

To contain costs, companies have turned to disease management over consumer-directed health plans, higher employee cost sharing and tighter managed care networks, according to the Kaiser report.

Michael Cannon, health policy director at the Cato Institute in Washington, believes disease management is simply the latest effort by employers desperate to control costs.

“It makes me wonder how long are we going to have to put up with the bad experiments that we otherwise would have gotten rid of sooner if individuals had made decisions for themselves?” he says.

That question—how much longer can the status quo persist when health care costs are twice the rate of inflation and the number of employers dropping coverage increases steadily —has been the subtext of the survey for the nine years Kaiser has published it.

Jon Gabel, another Kaiser report author, says the change in the employer-based health care system is already under way.

“We are not falling off a cliff,” he says, “but we are facing a slow and long-term erosion of our employer-based system.”

—Jeremy Smerd

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