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Employers Redefining Health Plans

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NU Online News Service, April 2, 6:25 p.m. – Employer interest in defined contribution health programs may still be growing.

A recent survey by Aon Corp., Chicago, found that 10% of the participating U.S. employers have already set up a defined-contribution health program, and 13% hope to set up a defined-contribution program in the next year.

The interest makes sense, because most other approaches to holding down health coverage costs are just “tinkering,” according to Richard Sinni, a senior vice president in the New York office of Aon Corp.’s consulting unit.

To really slash costs, “you have to place the employee in a decision-making role,” Sinni says.

Defined-contribution health programs and the terms used to describe them vary, but most combine some kind of employer-paid, high-deductible health insurance with employer-funded personal care accounts. Employees can use the cash from the personal care accounts to pay for routine medical expenses from the providers of their choice.

In some cases, employees can let unused cash accumulate in the accounts from year to year. Although the programs tend to use little or no formal care management, some may help plan members hold down costs by offering access to a preferred provider network.

Because of the bad publicity defined-contribution retirement savings programs have been getting recently as a result of the collapse of Enron Corp., Houston, many of the companies organizing the programs prefer terms such as “self-directed.”

U.S. employers began offering voluntary defined-contribution health programs to hundreds of thousands of employees in January. First-year enrollment in the programs is often low. “Employees need to be educated on what these programs are and how to use them,” Sinni says.

But the employees who have signed up seem to like the programs, and early returns suggest that defined-contribution programs can cut costs by 7% to 18%, Sinni says.

Some experts have wondered whether skyrocketing costs might lead to a return of restrictive health maintenance organizations. So far, Sinni sees little interest in a shift back to the traditional HMO approach. Employers still want to give employees’ more choices and easier access to care, and they also want to avoid the liability issues associated with limiting access to care, Sinni says.

But Sinni continues to see interest in a new generation of programs for managing chronic conditions such as diabetes.

Disease-management programs showed disappointing results when HMOs introduced them four or five years ago, Sinni says. But, in spite of the problems of the original programs, he finds that many employers would love to find a way to make the concept work, to cut their companies’ health coverage costs while improving the lives of the affected workers.


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