Employer Decision Making Regarding Health Insurance. Key Operational Issues in Benefits Purchasing


  1. Soliciting employee input is highly important and accomplished in multiple ways. The panelists emphatically stated they are systematically soliciting employee input into many facets of their health benefits programs ranging from input in terms of benefit changes (e.g. alternative medicine additions), provider networks (e.g. adding new providers or health plans), service performance (e.g. customer complaints), and overall satisfaction (e.g. satisfaction surveys). In addition, a number of firms offer flexible benefits programs that allow employees to do additional customization of their own total benefits packages. Companies use many different modalities to share information and solicit input and feedback. Many have direct toll-free phone line and e-mail access to benefits offices. Others conduct a variety of employee meetings and focus groups. Most use direct mail campaigns and other employee newsletters and the like. Some of these activities are necessary to meet their legal requirements, but most firms see them as part of a broader education strategy to raise employee awareness of and appreciation for the benefits that are available to them. Several panels noted that web-based communication is a key direction they are moving in currently, including the capacity to facilitate employee direct communication with health plans via this paperless medium. Health benefits satisfaction surveying has become extensive in the firms represented on the panel. Surveying is done either by the employers directly as part of ongoing employee surveys, or through health plans that are commonly required to use standardized instruments like CAHPS.

  2. The contribution strategy is a key instrument employed to achieve human resource goals. The importance of contribution strategies has grown in part to promote more cost consciousness for their workers, direct/steer workers to a preferred plan, and, in some instances, to defray the impact of cost increases. Some firms with influential unions still do not have contribution requirements for members of the bargaining units. But most of the participants believe that more cost participation is critical to sensitize workers to health care costs, and some now have explicit policies in place to pass along a portion of future price increases. Rising prescription drug prices have intensified the belief that employees should be made aware of the costs of services that they are consuming. Some employers are more consciously using contribution strategies as a steering mechanism than others, but most agree that this can be a powerful tool used when a firm wants to encourage enrollment in a preferred plan-such as those with “company plans” or, in other instances, to chose health plans with demonstrated superior performance. Fixed dollar employer contributions or percentage of premium contributions for employees may encourage selection of lowest cost plans. For those employers that are trying to promote selection of higher performing health plans, the contribution strategy may be intentionally divorced from the plan premium — illustrating that “value-based purchasing” does not mean promoting enrollment in the lowest price plans. These employers are particularly interested in promoting the enrollment of their most needy (sickest) employees and dependents in the best performing plans, even if they may be higher cost plans because employers believe they provide better value.

  3. For companies that have attempted to “migrate” employees to preferred products there are several steps to address. Employers on the panel have now had considerable experience with promoting certain health benefits options, especially managed care products. The participants offered some insights into how they have engineered the migration of employees to these products in the wake of their introduction. Typically, employers embrace a model of delivery, such as an HMO strategy, that they think will give them more control and accountability. They then develop a benefit package that either they will offer directly, or will get bidders to offer and issue requests for information/proposal. A premium contribution strategy is developed and pricing for the products is unveiled. Next, employees are subjected to education campaigns detailing the product options and the rationale for the changes being made and an open enrollment process is carried out. Subsequent to implementation, feedback is provided to employees, initially on options chosen and then later satisfaction survey results are collected across the options and shared with the workforce. This approach was described in part to contrast it with a defined contribution strategy that, as discussed below, has a far more passive approach associated with it.

  4. Implementation of new products or product designs is a complex but highly important function for health benefits. In the spirit of discussing operational features of health benefits coverage, the participants shared several insights about the importance of implementation of new products and designs. They underscored how complex this process may be, especially across diverse workforces in geographically dispersed areas. Some of the panelists represented firms that had dozens of HMO contracts across several work sites. The level of effort involved is often under-appreciated because the success of new initiatives can be undermined if the implementation process is poorly plans and executed. They are also reluctant to turn these functions over to outside consultants because of their lack of familiarity with key systems and employee relations issues. Examples of implementation activities mentioned by panelists included the following: 1) testing contractor ability to handle eligibility and claims processing functions; 2) preparing and carrying out employee communication initiatives; 3) assessing the effectiveness of interactions with other vendors, such as in the case of pharmacy or behavioral health care carveouts; and 4) closely monitoring performance through the open enrollment period. Such additional efforts are particularly taxing for units that have to continue to carry out their routine tasks. But failure in these basic functions may undermine and discredit new product initiatives.