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July 2005
Consumer-Directed Plans Get Mixed Reviews
Employees using consumer-directed health plans (CDHPs) are using preventive
services and asking for cost data, but the difficulty in finding cost and other
information to support decision making leaves them less satisfied than with
previous types of health insurance.
In results of a survey by McKinsey & Co., a management consulting firm,
only 44% of plan members reported being as satisfied with their CDHPs as with
previous plans they had used, with higher costs and difficulty getting good
information being two key factors. A recent Towers Perrin survey of
participants in various types of plans confirms the need for supporting data,
with 85% saying they need better tools and information to make good health care
decisions.
Early analysis of the effects of CDHPs suggest that the plans can slow health
spending without causing employees to skip necessary care. Fewer visit to
doctors, hospitals and emergency rooms but greater use of preventive care
related services have been noted in an Aetna study of employers offering CDHPs.
In many cases, employers cover preventive care services before patients spend
money out of their own accounts.
Source: The Wall Street Journal, June 14, 2005
CalPERS HMO Premiums to Increase 8.7%
The Board of Directors of the California Public Employees Retirement System
(CalPERS) has approved an HMO rate increase of 8.7% for 2006. While still
substantially above the rate of inflation and wage increases, it is an
improvement compared to the previous two years, when increases were 11% (2005)
and 18% (2004).
As the third largest purchaser of health care in the nation, CalPERS rate
increases are considered indicators of what other employers will face in the
upcoming benefits year. CalPERS officials attribute the more moderate increase
to actions taken last year to eliminate 24 higher-cost hospitals from their
network, a controversial move that many members opposed. Hospital and
prescription drug costs have moderated nationally, however, likely also
contributing to this year's more moderate increase for CalPERS.
Sources: Sacramento Bee, June 15, 2005; San Francisco Chronicle, June 16, 2005
United HealthCare Acquires PacifiCare
UnitedHealth Group of Minneapolis has agreed to acquire PacifiCare Health
Systems in a merger second in size only to the recent Anthem-Wellpoint union.
Pending regulatory and shareholder approval, the deal is expected to close late
this year or early next year.
The acquisition gives United HealthCare (UHC) substantial strength in two
markets: the Western U.S. and Medicare. PacifiCare has been active in the
Medicare HMO arena for over 20 years and is poised to administer the new "Part
D" drug benefit in 2006. The strengthening of UHC's national network, which
previously had been relatively weak in the West, will also position UHC to
compete in the consumer-directed market, which is expected to be a growth area.
United has grown substantially through acquisitions over the past three years,
during which time they acquired Oxford Health Plans and Mid-Atlantic Medical
Services, Inc. in the East. With the addition of PacifiCare, UHC's membership
will number 26 million, compared to WellPoint's 28 million.
Sources: Modern Healthcare, July 6, 2005; The Wall Street Journal, July 7, 2005
Employers Respond to Rising Costs
A recent PricewaterhouseCoopers survey of 150 large U.S. companies shows that
over 75% will likely increase employee cost sharing for health benefits next
year. Additionally, about one-fourth of respondents reported they are likely to
reduce wage increases because of higher health costs, and 20% will likely hire
fewer new employees. About one-half of respondents to the survey attributed
lower profit growth to health costs.
According to PricewaterhouseCoopers, healthcare currently represents 12-15% of
payroll costs for large companies, compared to 8% in 2000. Over 80% of
respondents indicated that providing financial incentives for employees to lead
healthier lifestyles was the most promising option for decreasing health costs.
There was less agreement on whether employee cost-sharing should be linked to
health behaviors: 48% said those exhibiting unhealthy behaviors should pay a
greater share of their health costs, while 42% felt they should not. A sizable
majority of respondents said better information about costs, quality and
generic drugs would both reduce costs and improve quality, but only 38%
currently provide a "great deal" of such information and 42% provide a
"moderate" amount.
Source: PricewaterhouseCoopers, July 18, 2005; California Healthline, July 18,
2005
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