Every month, HMOs loosen up their controls over patient choice and movements take place among providers. In many ways, it looks like we might be going back to the way we were. Recently, WellPoint’s subsidiary, Uni-Care Life and Health Insurance Co., announced several new plans for individuals and small businesses in certain types of markets. According to data in Integrated Healthcare Report, these products, known as the “No Deductible PPO Plans,” will combine the cost-saving features of an HMO with the open access network of a PPO. Individual members, for example, can select a $20, $30, or $40 co-payment for an office visit, and with this co-payment there is no annual deductible and no prescription drug deductible. Members are not restricted to a narrow network of providers, and may choose from a range of doctors and hospitals, and access network specialists without prior authorization. Will this trend toward more consumer choice, which will raise costs, play out with larger numbers of lives enrolled? No one knows. Will such plans take the steam out of efforts by physicians and hospitals to organize into systems that can go at risk under capitation agreement? Maybe. HMO Profit Plunges Reported Reports continue to point to financial hard times for HMOs. Profits dropped for New England-area HMOs for the first half of 1998, according to a report in the November issue of Integrated Healthcare Report. Medical and administrative costs were the culprit and 72 percent of the region’s HMOs reported a net loss. Of the approximately 60 licensed HMOs in New England, only four were marginally profitable. Kaiser Permanente also could face a bigger loss this year than 1997’s deficit of $266 million. Modern Healthcare reports that the annual loss may approach $500 million and Kaiser officials have stated that this amount is fairly accurate. Just two years ago, Kaiser posted a profit of $265 million. A new series of reports in the Integrated Healthcare Report reveal the results of Medicare risk contract terminations and service area reductions. A total of 371 U.S. counties were affected on January 1, 1999. More than 400,000 Medicare risk beneficiaries in 29 states will no longer have access to HMOs. This is because the Health Care Financing Administration (HCFA) is pushing hard to move Medicare beneficiaries into managed care, but at the same time is reducing reimbursements to HMOs. The economic pressure comes from the Balance Budget Act of 1997, which mandates 2 percent increases annually to Medicare HMOs while costs are rising at about 5 percent. Steep HMO Premium Increase Ahead HMOs and other managed care organizations will hit businesses with some of the steepest rate hikes in years, which will probably mean more out-of-pocket costs for employees. After several years of little or no rise in rates, average HMO premiums next year are expected to increase by at least 6 percent, double the average increase during the mid 1990s. PPOs will see average increases of 9.3 percent, compared with previous increases averaging 3.5 percent. According to a report published in the November 28, 1998 issue of the New York Times, many employers will pass along some, or all, of the additional costs to their workers. Factors pushing up costs include: rising drug prices, earnings concerns, demand for reimbursement, and new laws. Although HMOs are increasing premiums, it should be anticipated that providers will see very little money as a result. Medicare costs will further erode resources. It’s not a time to consider going back to the way we were. Solo practice is dead, the days of the independent hospitals are numbered, and there are far too many specialists. Additionally, a recent poll by Louis Harris and Associates revealed that 92 percent of the employers surveyed would reduce health coverage and hire more part-time workers who are not eligible for heallth benefits. Eighty-eight percent of the respondents believed that the government should provide health insurance to children and 74 percent want coverage for adults as well. Health Care Costs and the Future With health care costs on the rise again, and the first generation of managed care having matured itself into market grid-lock, it is inevitable that there will be a second employer revolt.
The timing of this second employer revolution is anyone’s guess, but it is likely to occur on the heels of a major and sustained correction in the global market. Employers will be moving volume to organizations that can offer the best value. From the private sector point of view, if doctors are willing to listen, and become committed to accountability and measurement, employers believe that those closest to the customer (i.e. patient) are best able to manage. Whether provider systems can rise to this challenge is unclear. But the stakes have never been higher.