Professional News
Employers Losing Faith in Managed Care Strategies
Psychiatric News
Volume 37 Number 2 page 9-9

Managed care’s "tool box" is nearly empty, according to a group of health care analysts, and employers are considering new approaches to the rising cost of insuring health care. Those conclusions emerged as a central theme of presentations at "Emerging Health Care Market Trends," a conference sponsored by the Center for Health System Change (HSC) last month in Washington, D.C.

Every two years, the HSC, which is funded by the Robert Wood Johnson Foundation, sends teams of researchers to interview 40 to 60 health care leaders about trends in 12 nationally representative sites. Those interviews are supplemented with physician and employer surveys. HSC presents its findings at a one-day conference, through issue briefs, and in a book (seestory on page 12).

Glen Mays, health researcher at Mathematica Policy Institute Inc., told the audience, "We [saw] a clear trend among health plans to decrease their reliance on the most restrictive tools of managed care."

He believes that the guiding philosophy of managed care is "tight management of a generous benefit package." The key tools for implementation, he noted, are selective contracting, capitation, gatekeeping and utilization reviews, and comprehensive benefits. All four tools have lost clout, according to Mays.


Consumers and employers have demanded greater selection of health care clinicians, which has diminished opportunities for selective contracting. In Seattle, for example, Regents Blue Shield had developed a network of physicians whom they determined by cost analysis to be particularly efficient. But demands from consumers and employers forced the insurance company to expand its network.

Capitation, which transfers cost risk to clinicians, has eroded because those clinicians are no longer willing to absorb the financial losses that resulted from the risk contracts.

"Providers just decided they’d had enough, . . .and they said ‘we won’t do it anymore,’ " said Brian Ancell, executive vice president of Health Care Services and Strategic Development at Premera Blue Cross, in a response to Mays’s presentation.

Mays cited administrative costs, consumer and physician dissatisfaction, and liability concerns as reasons that some managed care companies are abandoning the use of gatekeepers and other strategies to restrict access to care. The goal of using savings from managed care to provide comprehensive benefits was not met. In fact, benefit packages are becoming less generous because employers are instituting more copays and deductibles, he said.

Jon Christianson, the James A. Hamilton Chair in Health Policy and Management at the University of Minnesota, noted that employers view health benefits as a part of a total compensation package that enables them to attract and keep good employees. Employers responded to employee complaints about managed care during a time of extremely low unemployment, but the same employers might become more willing to accept employee dissatisfaction now because of the weakening economy and an easier time finding qualified workers.


Speakers identified several emerging trends that result from the changed economy and the perceived failure of managed care to contain costs. Joe Reilly, senior vice president at Aon Consulting, who advises companies on health benefits in New Jersey, said, "During the previous 18 months, I got blank stares when I mentioned defined contributions. Now employers are paying attention."

Under a defined-contribution program, employees receive a fixed amount of money, which they use to purchase insurance. Participants agreed that the publicity given defined contribution plans makes them appear more important than they currently are in the marketplace, but the strategy is "gaining a toehold" (Psychiatric News, December 21, 2001).

In general, employers have been reluctant to pass on to workers the full increase of health care costs in terms of higher premiums. Instead, they have increased copays and deductibles, because the higher costs are not so readily apparent to employees, and the changes do not affect everyone at the same time.

Employers are moving toward tiered insurance offerings in which employees can choose a lower-cost tier with a limited selection of clinicians, or a more expensive tier with higher premiums and higher out-of-pocket costs.

A new trend for psychiatrists and others concerned with mental health care is an increased focus on disease management and its link to productivity. Employers want to see concrete results from disease-management activities. So, rather than relying on standard programs developed by insurance companies, they are becoming more willing to develop their own programs and to judge them on their impact on employee productivity.

A transcript of the conference is posted at the Web site of the Center for Studying Health System Change at www.hschange.org.

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