Employers are using their ”economic clout ” to implement new health-care programs, such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), that will bring huge savings by 1990, according to a survey by a compensation and benefits consulting firm.
”Employers and their employees will be able to realize potential savings . . . of $50 billion to $80 billion by the end of the decade without sacrificing the quality of employee health care but even improving it,” said A.S. Hansen Inc., consultants based in Deerfield.
Larry Fisher, chairman and chief executive officer of Hansen, said the main findings of the survey of 861 corporations and other organizations support these projected savings.
Fisher said the tide turned in 1985 toward setting more cost-containment goals.
”Previously most employers have been attempting to hold their health-care costs down by making employees share more and more of the cost of insurance premiums, and through larger insurance plan deductibles and copayments,” he said. ”Now they are using their considerable economic clout to force free market competition among doctors and hospitals.”
Fisher said the competition will improve health-care standards by driving out the poor performers.
Fisher said a majority of employers set ”aggressive goals” in 1985 for containing health-care costs with about one out of five, or 22 percent, seeking to hold costs at or below the U.S. consumer price index.
Twenty-one percent of the employers sought to freeze costs at 1984 levels, and 15 percent wanted to reduce total spending to below 1984 levels, he said.
Fisher said the two principal ways to introduce economic competition among doctors and hospitals are HMOs and PPOs.
HMOs are doctors and hospitals joined together to provide health care for a comprehensive predetermined fixed fee, and they assume all health-insurance risks.
A patient in an HMO must obtain health care from the HMO doctors and hospitals to retain insurance protection.
PPOs are set up by providers to give health care to patients covered by traditional insurance plans, with payment to providers based on discounts or other financial risk-sharing. Employers and their insurance companies retain most of the financial risk.
PPOs also allow patients to obtain care from doctors and hospitals not in the PPO, while retaining insurance coverage for at least part of the providers` fee.
Fifty-eight percent of Hansen`s survey respondents said HMOs were more effective than traditional indemnity plans.
HMO enrollment in Illinois, for example, reached 1,085,929 Jan. 1, an increase of 304,246, or 39 percent, from a year earlier, according to an Illinois Association of Health Maintenance Organizations survey.
”Health conscious consumers in Illinois are turning to HMOs at a record rate,” said Frank Nicholson, IAHMO president.
”More and more budget-pinched health-care consumers are beginning to understand that you can combine top-quality medical care and comprehensive benefits, and still contain costs by joining an HMO,” he said.
HMO enrollment in the Chicago area rose 37 percent last year and membership stands at 855,235, the IAHMO survey said. Henry Keaton, IAHMO secretary, said more than 11 percent of the total population in the Chicago area is in an HMO.
