Expanded Liability Could Lead to Health Care Cuts

February 13, 2001 (PLANSPONSOR.com) - Nearly half (46%) of employers say they would likely quit providing health care coverage if legislation exposes plan sponsors to expanded liability, according to a new Hewitt survey.

The findings represent a 10% increase from last year’s survey of some 600 large plan sponsors.

Companies also said that increased liability would likely have a negative effect in the following areas:

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  • 81% – employer costs
  • 80% – consumer costs
  • 48% – medical management efforts

More than half (54%) support legislation that would allow an individual tax credit for the purchase of health insurance, 14% more than a year ago.

Consumer “Driven”

At present, just 22% are considering a defined contribution approach to health care, but more than half are looking at other “consumer-driven” options, including self-directed plan designs and multi-tier networks.

Employers moving toward a defined contribution model say they are doing so to:

  • 85% – control program costs
  • 70% – give control of health care decisions to employees
  • 30% – limit lawsuit liability
  • 23% – transfer health management activities to a third party.

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While 84% currently choose/review health care providers via a paper RFP process, only 22% expect to still be doing so in three years.  Over half (60%) expect to take advantage of Internet-enabled e-RFPs and automated negotiation analysis by 2004, and 28% plan to use Internet-enabled HMO auctions with real-time competitive bidding.

Respondents expect a 12% increase in costs across all plan types this year, and are bracing for a 20% hike in prescription drug costs.

While nearly two-thirds (63%) of companies believe that health care benefits are a basic employee benefit need, they still rank lower in importance than pay, work environment, and work opportunities.

Health plan improvements were seen as needed in:

  • health data analysis and tracking (58%)
  • Internet information access and plan site links (57%)
  • medical management and disease management programs (43%)
  • financial reporting and accounting (37%).