Employers Want Lower Costs from Health Plan Providers

October 14, 2008 (PLANSPONSOR.com) - Recent research indicates that two thirds of employers are willing to forego customization of health plan features to secure reduced pricing from their insurance providers.

As a result of cost pressures, many employers have implemented a number of plan changes including high-deductible health plans, wellness initiatives, and disease management programs, but employee cost-sharing continues to be the most prevalent health care cost containment strategy used or planned for use with active employees and retirees, PricewaterhouseCoopers (PwC) pointed out in its research report. However, its research showed employers want better provider discounts and administrative fees from their health insurance providers.

While large companies ranked accuracy and timeliness of claims (93%) as the most important service offering from health plans, it was followed by provider discounts (82%). For small companies surveyed, the top three most important service offerings were accuracy and timeliness of claims (84%), provider discounts (71%), and administrative fees and access to eligibility/payments (tied at 56% each), PwC said.

Employers increasingly want to work with fewer vendors to manage all of their health-related benefits. Almost half (49%) of the large employers surveyed said they prefer a partially-integrated vendor management model: having one vendor manage all health-related benefits and other vendors manage all welfare, disability, and retirement plans. Fifty percent of small vendors said they prefer a totally integrated vendor management model.

“Customization of health care plans adds to administrative cost, particularly among providers, and the majority of employers said they would be willing to accept less customization if insurers were to offer a reduction in administrative fees,” the report said.

In addition, the research found employers want more meaningful data from their health benefit programs and they see an increasing need to measure and manage the costs and value of those programs. This is increasing the expectations for data warehouse managers to effectively integrate data related to employee conditions, utilization, and outcomes. Employers are also focusing on using data to help monitor employee productivity.

Employers reported mixed satisfaction ratings of insurer-provided services. Levels of satisfaction were lower among smaller employers (under 250 employees) for all of the 12 insurer-provided or related services studied in the survey.

Large employers surveyed by PwC rated wellness services nearly as high in importance (80%) as the basic functions of accurate claims processing and provider discounts. Fifty percent of small employers said they were important.

However, employers are recognizing that wellness programs must be coupled with financial incentives to get employees to participate. Two-thirds of the employers surveyed said they see value in offering incentives to employees for participation in wellness or disease management programs or for responsible health behavior.

Employers reported that workers are two to four times more likely to enroll in wellness programs if they receive incentives such as gift cards or premium reductions.

To provide research-based insight, PricewaterhouseCoopers' Health Research Institute (HRI) and the firm's Barometer research team surveyed senior executives at more than 100 large U.S.-based multinational companies and more than 250 privately held small companies. The large companies each have an average of 8,000 employees and revenue of about $3 billion. The small employers each have a workforce of about 200 and less than $50 million in revenue.

In addition, PwC surveyed more than 500 human resources executives separately on benefit plan design issues.

More information is at www.pwc.com/healthindustries .