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Employer Reaction to Current Rate Increases

Many large employers are giving up on national plans.

April 1, 2000
Related Topics: Health and Wellness
With defined-contribution plans still a ways off, employers are attempting to control escalating health costs in other ways. According to a nationwide survey of 600 companies by Hewitt Associates, companies are attempting to control costs by:

Adding lower-cost plans: If a company's current health plan isn't willing to budge on its increase, most companies -- particularly those in larger markets -- can shop around and find plans with better deals. In so doing, they can offer employees a choice of switching to a new plan with lower costs or staying in the old plan with higher costs.

Leaving the national plan behind: Most large employers have given up contracting with a single national plan in favor of working with local plans in locations with large numbers of employees. In most cases, they get a better-cost deal as well as a stronger local provider network for their employees.

Reworking prescription drug coverage: Because skyrocketing drug costs are a big part of insurance hikes, a lot of companies are changing their prescription drug coverage. Many are increasing employee co-payments, and some are introducing a three-tier system in which employees pay the least amount of money for a generic drug, more for a brand drug on an approved formulary list, and the most for a brand drug that isn't on the list.

Using the Internet: This year, several companies worked with Hewitt to host an Internet auction where for the first time HMOs competed directly on price. Only highly rated plans were invited to participate, and as a result of the auction, most reduced their rates anywhere from 2 to 8 percent. Hewitt's consultants expect more companies to look at ways of using the Internet to help them offer high-quality, affordable health care to employees.

Contracting with plans that offer specialized programs: Companies that have employee populations with a high prevalence of specific health conditions -- such as asthma, diabetes, or heart problems -- are starting to contract with health plans that specialize in those areas. Their employees receive more specialized care to help them better manage their conditions, and as a result, their health-care costs usually decrease.

Workforce, April 2000, Vol. 79, No. 4, p. 40.

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