Rapidly rising health care costs have led more than one employer to search for better ways to provide health care coverage for their employees. Perhaps the most innovative approaches I’ve encountered is that of Manatee County, FL.
I had the good fortune to sit next to Bob Goodman, director of the program, at lunch during a conference in Arizona on prescription drug management. It was one of the more interesting discussions regarding employee benefits I have had in years.
Here’s what Manatee County is doing. They are self-insured, self-administered, and self-managed. Goodman and his staff, numbering a handful of FTEs plus about a dozen contract workers providing case management and related services, handle claims, managed care, network contracting and relations, wellness, and program administration. Seems pretty standard.
The unique features are several.
First, employees are financially encouraged to develop healthy behaviors through different cost-sharing arrangements. Second, the County has implemented a full-service wellness center, focused on encouraging employees with health issues to take charge of their health before it becomes an expensive, unpleasant, and potentially fatal issue. Third, Goodman is hiring his own full-time internist to work in the wellness center, thereby ensuring quick access to medical care for county employees, who otherwise might have to take time off from work to obtain care for themselves or their dependents. Fourth, despite a rich plan design, Manatee County has enjoyed trend rates below 10% for several years. Fifth, Goodman is planning on opening a “captive” pharmacy, to better manage the only major expense category that his program did not directly address.
The program was initiated after the local government, frustrated by the usual non-solutions offered by their existing health insurer and broker after several years of rapidly rising health care costs, asked Goodman to come in and take a look. With his extensive background in TPA operations and management, and complete lack of any agenda, Goodman recommended the County blow it up and do it themselves. To his great surprise, they agreed, and hired him to lead the effort.
What does this mean for you?
If you are a health insurer or broker, a wake-up call; if you don’t provide solutions, real solutions, you will find some of your customers decide to take matters into their own hands. For those brokers willing (or more aptly capable) of true innovation, think about this as a separate business line. Of course, you’d better have someone like Bob Goodman on staff before printing up the marketing materials.
If you are an employer, you do have alternatives. Let me know if you want more information on Manatee County’s program. I’m planning on visiting their operation, and will report on the visit here.

The backlash against managed care did not reduce HMO enrollment in the late nineties. Although there was a lot of “talk about backlash

For consumers, managed care is a choice between limited access to providers and premium costs; the greater the access, the higher the premium; the more limited the choice of providers, the lower the premium. In the late nineties, the so-called “managed care backlash” occurred when cost increases moderated, and consumers demanded access to any provider.
This spawned the “open access” HMO model, tiered benefit plans, and the explosion of PPOs. Now, with costs once more on a double-digit inflation path, there appears to be more willingness on the part of consumers to trade access for lower cost.
The Center for the Study of Health System Change released a national report entitled “More Americans Willing to Limit Physician-Hospital Choice for Lower Medical Costs“.
The Center reported that “Between 2001 and 2003, the proportion of working-age Americans with employer health coverage willing to trade broad choice of providers for lower out-of-pocket costs increased from 55 percent to 59 percent

A new report indicates what many have perceived for some years; the world of health care insurance is increasingly dominated by larger payers. Conning & Co.’s report indicates that larger insurers/managed care firms are buying up smaller ones in an effort to grow market share.
This is consistent with HSA’s own experience; as the larger plans seek to keep their stock prices moving up, revenue growth becomes increasingly important. Their growth choices are pretty limited –
1. grow organically by taking market share from a competitor by cutting price (a really bad long term plan) or
2. buy up other plans.
The acquisitions of FirstHealth, Oxford, Connecticare, et al are all indicative of this trend. Good news if you own a smaller managed care firm; bad news if you are a provider or employer operating in an oligopoly environment.
The health care market is rapidly maturing, and will come to be dominated by a selection of large players – Aetna, UHG, Anthem, and a few others.

A new study indicates HMO enrollment in New England has declined over the past year. HealthLeaders-Interstudy (here’s hoping the new company gets a new name shortly)’s just-released New England Health Plan Analysis indicates that all states save New Hampshire experienced a drop in HMO participation.
There is continuing migration to PPOs,” said Paula DeWitt, HealthLeaders- InterStudy analyst. “Massachusetts has strong regional plans and will likely continue to be an HMO stronghold, but even it isn’t immune to the migration into more open-access products. In addition, while all New England states reported net profits through the third quarter of 2004, profits were down in Massachusetts, New Hampshire, and Rhode Island compared to the same period in 2003.”
Insurance Journal noted “The firm also reported on other factors at play in the managed care fiel. Tufts Health Plan has formed an alliance with national player CIGNA HealthCare to offer an open-access PPO-type product to large- and medium-size businesses. Medicare HMOs in New England are adding options and some are enhancing benefits for 2005. For example, Fallon Community Health Plan is offering a new option called Fallon Senior Plan Saver with no premium.”

Weiss Ratings (yes, I’m a big fan) released an analysis of recent changes to employees’ health plans, and there is a notable lack of innovation.
According to Weiss, “Higher prescription drug co-pays were cited by 34.3 percent of consumers polled, while 23.8 percent indicated higher co-pays for physician visits.” In addition, in perhaps the most drastic move to control health insuranc costs, 11.3% lost their health insurance altogether.
This last statistic may be inflated due to the nature of the study, so I wouldn’t generalize the result to a larger population. However, it is important to note the large percentage of respondents who saw an increase in costs shifted to them from the health plan. Call it “consumerism”, “accountability”, “burden sharing” or what you will, it is clear that employers are fast running out of ideas.

Weiss Ratings reported very strong earnings from HMOs in the first half of 2004. Weiss, perhaps the most insightful of the rating agencies, noted that over half of the HMOs studied were financially strong, and the industry generated $5.8 billion in profits during the first six months of 2004.
The strong results were felt even among the less-well-off HMOs, as the number of plans considered “weak” financially dropped from 40% in 1998 to 17%.
Weiss did not provide any insights into the reason for the financial improvement, but strong premium growth generated by higher rates, better risk selection and exiting of unprofitable markets, and industry consolidation were likely contributing factors.
Interestingly, the financial improvement occured at a time when health care costs were continuing to increase at rates well above those for overall inflation. Some may note the contradiction here – the companies tasked with managing health care costs were generating big profits while failing to accomplish their appointed task.