Should benefits advisors encourage employers to play a role in organizing health care delivery systems in the markets where their employees receive care?
In the past, employers assumed they could leave that job to hospitals, doctors and, possibly, insurers. Today, health care costs are doubling every 6 years. Employers are looking for a way out of the trap, but existing cost control efforts have had disappointing results.
Many employees and doctors view efforts to limit costs through managed health maintenance organizations as being unfair and potentially harmful attempts to ration care.
Health plan competition has failed to hold down costs because most physicians and hospitals have joined most of the large plans in their communities. Providers in one plan have little incentive to lower prices to attract patients from the other plans they also belong to.
The typical employer is coping by increasing employees' out-of-pocket costs. That strategy has not slowed the overall rate of increase for health care costs, and it may alienate employees and providers.
Some employers are adopting defined contribution health plans that offer a fixed annual contribution to employees' health coverage expenses. The new DC plans give employees an incentive to hold down costs, but, due to a lack of genuine provider competition, they do little to affect the underlying cost of care.
Employers strategy choices include shifting the focus from what plan the employer will offer to how employees choose plans, how employees buy care, or how employees take care of themselves or receive care.
The Structured Offering
A company that adopts a structured offering tries to create true provider competition by organizing 2 or more completely separate blocks of physicians and hospitals.
A few physicians might belong to more than one block, but, in general, the list of providers in one block should be different from the list of providers in the other blocks.
The physicians and hospitals in a provider block do not have to share health care risk. But the collective performance of a provider block should affect the market growth of each provider in the block.
If this approach works, competition between the provider blocks can help hold down prices.
One challenge is to keep a provider block from drawing the healthiest employees away from competing blocks. Plan administrators can control this tendency by using a rating methodology that adjusts for employees' health status and demographics.
