Because it has proved far easier to reduce health-insurance benefits or shift costs to their employees than a lot of large companies had anticipated, many firms will have no trouble implementing even more restrictions in the next two or three years, a new insurance industry survey suggests.
Moreover, if--as may be likely--federal income-tax laws are rewritten to classify health insurance as fully or partially taxable, many companies may move to cut benefits even more.
More Varied Restrictions
Even if tax-law changes don't force such reductions, workers are almost certain to see their companies inaugurate ever more varied restrictions on health-care payments.
If workers and their bosses have found this developing trend confusing, though, the new study warns that even more upheaval is to come. "Corporate health plans look set to change at least as much in the next three years as they have in the recent past," the study concludes.
In all, workers apparently stand a good chance of finding a continuing squeeze on their ability to freely choose a physician and hospital and have their health-care bills paid.
If that sounds like nothing but bad news for employees, however, the poll--conducted by the Louis Harris organization for the Equitable Life Assurance Society--found surprisingly little resistance to many restrictions on health-care benefits overall. Echoing a plethora of previous polls, the new Harris survey, which is being released today, found workers are generally indifferent to cuts, except those that actually cost them money out of pocket--like increased deductibles and co-payment plans in which employees must share out-of-pocket cash expenditures.
In all, observed Drew E. Altman, a researcher who reviewed 15 earlier surveys at the Robert Wood Johnson Foundation in Princeton, N.J., the results of the new Harris poll appear to dovetail with previous surveys that have repeatedly made it clear that while both workers and their employers agree that health-care costs are a problem, few seem ready to take drastic steps to do very much about it. And when employers speak of health costs being "under control," agreed two Equitable executives, the executives generally really mean that their own expenditures have been made more stable--not that the total bill for the nation's health care has stopped growing.
Altman was co-author of an analysis of recent measurements of public opinion about rising health-care costs. He was not involved in the new Harris survey.
Such cost increases have been widely reported for more than a decade. Many experts believe the national health-care bill will rise from $322 billion in 1982 to $690 billion by 1990 and $1.9 trillion by the turn of the century. At that rate, costs are rising by $50 billion annually and doubling every six years.
The poll, to be released today, is the third in what has become an annual series of surveys commissioned by Equitable to inquire into various aspects of American health-care public policy.
This year's Harris poll questioned 1,253 workers at firms employing 500 or more people, along with 1,250 corporate benefits officers, 200 senior executives, 200 personnel directors and 110 insurance brokers and consultants working in the health-insurance field. Among the results were these:
--Cost reduction programs have had a significant effect, with employers estimating that costs per employee this year will be 16% to 18% lower than they were three years ago. But the most successful approaches, the Harris poll found, depend on a variety of as many as 17 or 18 different approaches to cost control. No one single program works by itself.
--Though a clear majority of executives believe benefits would not drop if they became taxable, between 24% and 32% of executives in firms and 56% of insurance consultants and brokers think health-care benefits would end up being reduced in the event the tax code is changed to expose such fringes to taxation.
--Nearly three quarters of employers have, in the last three years, introduced changes in health-care coverage to cut costs. The most frequently used techniques are requirements for mandatory second opinions before certain types of surgery; increased deductibles, in which the annual amount workers pay out of pocket for medical bills goes up; pre-admission review programs to control the length of hospital stays, and the making available--now legally required for most firms--of a health-maintenance organization as an option to conventional health insurance. HMOs, as they are called, provide all medical care to a person at a set annual cost. Patients see physicians employed by the HMO and are admitted to hospitals owned by the plan or that contract with it.
(In fact, HMO backers claim this form of health care is growing in use at more than twice the pace expected just a year or two ago. Dr. Paul Ellwood, the Minneapolis physician sometimes identified as the "father" of the modern HMO, said his estimate of the prospective clientele of HMOs has doubled in the last six months--to 40 million people enrolled by 1990 and 120 million by 1995.)
--A surprisingly large proportion of employees rated the cost controls as acceptable--with 79% of the workers at large accepting them, as well as 53% for whom the controls had already increased the amount of money they actually had to spend out of pocket on medical bills. Not unexpectedly, however, the Harris group concluded that workers have little enthusiasm for increases in co-payments--in which employees make up the difference between what an employer's insurance will pay for a procedure and its actual cost.
"Obviously, increased cost sharing is not what employees want," the Harris group concluded.
--Cost controls have different effects on workers, depending on their salary levels. Eight percent of employees earning $15,000 a year or less, for instance, were more likely to forgo needed health care in the face of larger deductibles, co-payments or other restrictions. Only 3% of those earning more than $35,000 were willing to forgo treatment. Employees in lower income brackets also were more likely than those earning more (by 18% versus 10%) to have selected a physician strictly on the basis of price.
To cope with the challenge of the unequal burden of cost controls, Equitable officials speculated, companies may be forced to introduce graduated deductible schedules in which the share of costs paid by the employee increases with salary. Such staggered fees are now rare. Equitable itself introduced such a system a few months ago in which it reduced the deductible of workers earning $15,000 or less by $50--to $100 a year--and set up a graduated scale of deductibles in which payments of executives making more than $200,000 a year go up to as much as $600 for a single person and $1,200 for a family. A worker in the $15,000 to $30,000 bracket saw no change in deductibles, which stayed at $150 for a single person and $300 for a family.
The Harris poll found that many companies had effectively blunted some employee resentment to increased sharing of health costs by adding benefits to existing insurance packages. Favorite options were vision and dental coverage.
The new poll, however, struck the Robert Wood Johnson Foundation's Altman as something likely to become another piece of evidence of what he called in a 1984 medical journal commentary a form of "national schizophrenia." While many Americans claim to be concerned about health costs, few are willing to do very much about them, especially if it costs them money. Last year, Altman and Robert J. Blendon, another Robert Wood Johnson researcher, reviewed 15 major national opinion polls--including the first Harris survey commissioned by Equitable. The polls spanned the period from 1981 to last year in which public awareness of health-cost problems increased significantly.
"The fundamental underlying dynamic, I think, has not changed too much," Altman said in a telephone interview from New Jersey. "Americans and employees want to see health-care costs controlled, but they don't want to pay too much out of their own pockets to see that happen."
Poll after poll has established, noted Altman, that people at large favor limiting hospital rates and physician fees, but not increasing their own direct health-care costs. Though escalating health-care costs have prompted widespread predictions that rationing of life-saving services may eventually be necessary, Altman said he simply does not believe American society will permit such a situation to occur.
"Absolutely nobody wants to do it," he said. Essential to the ongoing attempts to slow the growth of health expenditures, the Harris organization found, is an approach to cost control that emphasizes achieving a large effect by use of many small and different tools. And no cost-reduction plan can succeed, warned Equitable assistant vice president Steven M. Putterman, if it is not carefully and extensively explained to workers so they understand exactly how their benefits may change and how and why they may be stuck with more of their own medical bills.
Putterman and Robert E. Alberts, Equitable regional vice president based in Los Angeles, emphasized in an interview that companies that took the greatest pains to prepare workers for coming changes in health benefits--through small meetings and extensive written materials sent to employees' homes so they could read it at their leisure--were most successful in getting employees to accept them.
Among the expanding arsenal of anti-cost weapons being used by employers are: plans in which workers pay part of their insurance premiums; incentives are offered to induce patients to choose outpatient surgery and other cost-saving ways to shift procedures out of hospitals; preadmission reviews; mandatory second-opinion programs; payment systems in which doctors and hospitals are paid the same set fees for treating someone with a certain condition, regardless of its seriousness; use of so-called "preferred provider organizations" in which doctors contract with insurance firms to accept set fees; health-promotion and education programs within companies; financial incentives to encourage healthful conduct by employees, such as not smoking and using seat belts, and increased use of HMOs.
In fact, HMOs are likely to become an even greater force in health care than they are now, predicted Ellwood, head of Interstudy, a Minneapolis-based consulting firm that has long been the nation's most prominent backer of the HMO concept. Ellwood believes the burgeoning HMO movement is leading to development of what he calls "Super-Meds," or giant HMOs that will contract with employers to take over all health care for their workers, setting up patient provider organizations and even writing their own conventional insurance in addition to offering HMO services.
Putterman said Equitable is experimenting with an innovative new program in which a staff of nurses advises doctors and patients in cases of severe illness or injury where recovery is likely to be long and costly. In such cases, a so-called "medical case management program" is brought into play in which nurse advisers suggest specialized services like rehabilitation medicine and specialized nursing care.
At the moment, Equitable has 26 nurse advisers handling 300 difficult long-term cases nationwide, Putterman said.
Putterman and Alberts noted that the case-management program may eventually serve as a blueprint for the handling of more routine illness and injury claims.
In all, said Putterman, Equitable sponsored the new survey and its two predecessors because the company hopes "to show ourselves, the employers and the public that some of these things work and they make sense."