Employer-Sponsored Health Plans Battle for Employers' Attention
By CYRIL TUOHY, managing editor of Risk & Insurance®
Health-maintenance organizations continue to lose ground against cheaper and more flexible preferred-provider organizations (PPO) and consumer-directed health plans (CDHP), a pair of new studies has found.
Offerings of HMOs fell from 28 percent of employers surveyed to 26 percent, and HMO programs represent 19 percent of all covered employees in 2010, according to a new survey released last month by Mercer.
"Now the growth is in consumer-directed health plans, in which high deductibles are made more palatable with an account that allows employees to accumulate healthcare dollars by using health services more wisely," said Beth Umland, Mercer's director of health and benefits research, in a statement on Nov. 17.
The Mercer National Survey of Employer-Sponsored Health Plans samples public and private companies with 10 or more employees. The results represent feedback from about 800,000 employers and more than 104 million full- and part-time employees.
In a separate but much smaller Aon Hewitt study of 160 large employers covering about 1 million participants, HMO rate increases were also found to have outpaced average healthcare cost increases, said Jeff Smith, a principal and leader of Aon Hewitt's HMO rate analysis project.
HMO rates for 2011 jumped 9.8 percent after plan changes, negotiations and terminations, the Aon Hewitt study found. The increase follows a 9.4 percent jump in 2010. The 2011 rate hike is the highest since 2006. Aon Hewitt released its study Nov. 30.
"If HMO rates continue to outpace average healthcare cost increases, employers may elect to take even more aggressive steps in the coming years, such as eliminating HMO plans altogether," Smith said.
Movement out of HMOs and into PPOs has been going on for nearly a decade as PPOs offer employers lower premiums and more flexibility in sharing costs with members.
HMOs use a network of healthcare providers and do not cover care provided outside the network. PPOs also use a network of providers, where there may be incentives for members to use the network providers, but they are covered for care received outside the network.
CDHP GROWTH THE KICKER
But it's the steady rise of the CDHP that has taken a bite out of the HMOs' market share, according to survey data.
Enrollment in high-deductible CDHPs grew from 9 percent of all covered employees in 2009 to 11 percent in 2010, the Mercer study found. CDHP enrollment has risen by two percentage points each year since 2006, according to the company.
CDHP enrollment rose fastest this year among the largest employers, those with 20,000 or more employees--a group that tends to set trends for other employers--according to the Mercer survey.
More than half--51 percent--of these employers offered a CDHP in 2010, up sharply from 43 percent last year. Enrollment in them rose even faster, swelling from 9 percent to 15 percent of covered employees.
"As both employers and employees become more comfortable with high-deductible plans, we're seeing more organizations willing to commit to the consumerism concept," said Susan Connolly, a partner in Mercer's Boston office.
The cost of the health savings account-based CDHP averages $6,759 per employee among all employers in 2010, almost 25 percent lower than the cost of PPO coverage, the Mercer survey found. CDHPs are more popular among younger, unmarried and generally healthy employees, the Aon Hewitt study also said.
HMOs are still offered by 44 percent of employers in the Northeast, and by 33 pecent of employers in the West, Mercer found.
December 10, 2010
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