Health Plans Implement Cost Containment Strategies

August 12, 2004 ( - Faced with heavy burdens due to rising health-care costs, plan sponsors are considering a number of cost containment and management strategies: utilization management, disease management and benefit design and cost sharing.

Since 2001, health plans in six out of 12 profiled communities reintroduced prior authorization requirements for selected services after having eliminated these requirements. In reintroducing prior authorization requirements, health plans have targeted those services that offer little or no clinical benefit while being careful not to reduce access to potentially beneficial services. In many cases, the new prior authorization requirements were less restrictive than those the plans had used previously, according to a report from Health Affairs.

For example, out of 56 plans profiled, 15 have increased their use of retrospective review and provider profiling, compared to only two that have decreased their use of this utilization management process. Additionally, seven plans have increased the use of concurrent review processes, compared to only two cutting back. Health Affairs found that although most plans historically have used concurrent review processes only in Health Maintenance Organizations (HMOs), several plans introduced these approaches into their preferred provider organizations (PPOs) in 2002-2003, as these products have become more popular and costly.

Other net increases in utilization services came in the number of plans increasing the use of outpatient services and procedures (five versus zero decreases), specialist referrals (four versus one), and prescription drugs (seven versus zero).

Disease Management

Similar to the expansion in utilization management programs since 2001, health plans continued to expand disease and case management programs in 2002-2003 in an effort to improve care and reduce costs for patients with chronic and complex health conditions. Plans in at least half of the study communities added new disease management programs during this period, while 15 out of 56 plans increased their use of these programs versus only two the decreased usage.

Additionally, health plans have begun to move beyond traditional disease management to more targeted approaches that seek to identify and address the health care needs of high-risk patients who are likely to generate high health-care costs. Unlike traditional disease management, these approaches focus on managing the health care needs of high-risk patients through intensive and customized case management, instead of emphasizing standardized, disease-specific interventions that apply to an entire population of members.

Many plans (18) have introduced intensive case management and predictive modeling applications alongside their traditional disease management programs. These plans view member-focused case management programs as “filling in the gaps” by serving members with complex conditions and health care needs that are not addressed by existing treatment protocols and standardized care plans. However, other health plans have adopted intensive case management as an alternative to traditional disease management programs that are viewed as ineffective or of benefit to limited numbers of members.

Benefit Design and Cost Sharing

Nearly all of the health plans studied reported increasing consumer cost-sharing requirements during 2002-2003 in an effort to control escalating premium costs. Continuing a trend noted in 2000-2001, 35 plans increased copayment and deductible levels, two plans added deductibles to HMOs that previously offered first-dollar coverage, and five plans introduced coinsurance into both HMOs and PPOs that previously offered fixed-dollar copayments.

Popular in 35 out of the 56 plans studied was the use of consumer-directed health plans. Health plans indicate that consumer-directed products offer employers lower premiums than traditional HMOs and PPOs by shifting more costs to consumers and encouraging consumers to be more economical in their patterns of service use. Nevertheless, employers’ interest in consumer-directed products has remained tepid in most markets, and enrollment has been modest, with some exceptions, Health Affairs found.

Data for the analysis was collected as part of the Community Tracking Study (CTS), a longitudinal study that uses multiple data sources including site visits and national surveys to examine how local health care systems are changing. As part of this study, site visits are made every two years to twelve metropolitan communities that were randomly selected to be nationally representative of local health care systems in markets with more than 200,000 residents: Boston, Cleveland, Greenville (South Carolina), Indianapolis, Lansing, Little Rock, Miami, northern New Jersey, Orange County (California), Phoenix, Seattle, and Syracuse.

A copy of the report is available at