The majority of large employers don't lean on their health plans enough to improve the plans' performance, costing the employers millions of dollars annually, according to a new study.
Fewer than half of the 181 unidentified employers surveyed by Bethesda, Md.-based Watson Wyatt Worldwide said they did an adequate job in six of eight best practices to optimize their relationships with health plans. Employers surveyed averaged 20,000 employees.
Those best practices, identified by Watson Wyatt in collaboration with the surveyed companies from across the nation include:
* Periodically auditing health plans.
* Comparing plan performance with specific benchmarks.
* Having a formal strategy for managing health plans.
* Making multiyear commitments to the plans.
* Sharing data with and among plans.
* Seeking defined performance outcomes.
* Monitoring health plan performances and how health plans report data.
* Establishing criteria for purchasing healthcare coverage.
For example, only 59% said they did a good job setting criteria for purchasing healthcare coverage (See chart).
How well a company scrutinizes its health plan has a direct correlation to costs, the study concluded.
Firms that reported premium increases of less than 5% in 1998 and 1999 said they have done a good job performing an average of 3.5 of the eight best practices.
By comparison, those experiencing a 9% or higher annual premium increase in 1998 and 1999 said they have done well in an average of 2.7 best practices.
For a company with an average of 20,000 employees, that percentage difference in premium hikes translates into $6 million annually that could have been saved, the study said.
Richard Ostuw, Watson Wyatt's global practice director of healthcare consulting, said he believes few companies keep close tabs on their health plans simply because the companies don't know what to do.
"It's hard for companies to take initiative if they don't know what they need to do and how to do it," he said.
For example, regularly auditing health plans is the practice likely to produce the highest level of satisfaction among employers and their workers. Eighty-six percent of companies that said they audited their plans well achieved the desired outcomes. But only 38% of the companies surveyed said they believe they did a good job of performing audits.
"Few employers have the skills to do it themselves. They don't have the experience and technical knowledge about health plan processes and procedures," Ostuw said.
Ironically, he added, employers often retain several healthcare consulting firms to help them in dealing with their health plans but could be further stymied when they receive contradictory advice.
Ed Susank, a principal with New York-based benefits consulting firm William M. Mercer, said he agrees with Ostuw.
He also believes that an employer's lack of assertiveness can impede innovation in healthcare delivery.
"The rate at which health plans create innovation can be accelerated by pressure from large employers," Susank said.
However, Ostuw said, the double-digit premium increases many employers are currently facing will force them to focus more on their dealings with health plans.