"What's happening to my health care plan?"

If you have not been asked this question yet, expect it soon. Many HR/benefits directors report they are receiving interest from employees to change or add health insurance options.

To help answer their queries, three publications can help inform benefit professionals about the genesis of what is changing our health care policy and health benefits plans:

1. The Rand Health Insurance Experiment.
2. "Patient Power," (1992) by Goodman and Musgrave.
3. "To Err is Human, Building a Safer Health System," (2000) by the Institute of Medicine.

The Rand Health Insurance Experiment remains the single largest health policy study ever conducted by the federal government. This multimillion-dollar experiment, conducted between 1971 and 1986, provided health insurance plans to several thousand people, and the plans varied by the amount of patient-pay deductibles, coinsurance, and out-of-pocket expenses.

The experiment revealed that cost-sharing had very little effect on health status for employer-sponsored health plans. Those individuals with low out-of-pocket expenses and greater utilization did not have any better health outcomes than those with higher deductible plans with lower utilization.

"Patient Power" was an assertive response to the Clinton administration's effort to nationalize health care. The infamous fictional couple in the book, Harry and Sally, helped rally support against the national health care plan.

Although not explicitly mentioned in the book, the general pretense is that these two fictional characters - representing all of us in America - could make better health care decisions if they were more engaged and empowered in the health care buying process. The book and its supporters contributed to the creation of Archer medical savings accounts. MSAs were the stepping stone to today's health reimbursement arrangements, health savings accounts and consumer-driven health plans.

"To Err is Human, Building a Safer Health System" is a stunning and controversial book from IOM that reveals safety issues with our nation's health care system - specifically medical errors that, the book estimates, cause 98,000 deaths each year.

While the book has its critics, it created a groundswell of support for patient-safety advocates, like the Leapfrog Group, fueling efforts to have employers and consumers select health care providers based on quality, safety and evidence.

Recommendations

The changes currently underway in today's health care plans and health care policy can be traced to these three reports. If these three reports are correct in their conclusions, keep three things in mind if you are considering changing your health plan:

First, consider providing employees with incentives to adopt HSAs, since high-deductible health plans do not adversely effect a person's health status.

Second, empowered employees make better health care purchasing decisions than any third-party payer.

Third, if empowered by choice, employees will choose safer health care providers. Joseph P. Newhouse, the John D. MacArthur professor of health policy and management at Harvard University, suggested in his article, "Consumer-Directed Health Plans and the Rand Health Insurance Experiment," that the best health care scenario is a combined approach, with consumer-related concepts working together with best managed-care systems.

Alain C. Enthoven's and Laura A. Tollen's article, "Competition in Health Care: It Takes Systems to Pursue Quality and Efficiency," states that employers should expect health care provider information based on prevailing standards and outcomes, and ensure members access to this information and alternative treatments. Increasing employees' engagement with such information and improving their ability to research and digest it is crucial.

Here are my four recommendations for employers to focus on to maximize employees' health benefits:

1. Revisit the reason your company has a health care plan. Establish a stated policy that governs the purpose of your employer-sponsored plan. For example, if the reason you have a health care plan is to recruit and retain qualified employees, then maximizing your employees' utility is your primary goal.
2. Do not let the myriad industry reports distract your policy in the wrong direction. It might be time to survey your employees as to what they value the most. Without a well-designed survey, you might find disengagement from the decision-making process is what your employees most desire. The Kaiser Family Foundation reports that the larger the employer, the more an employee looks to the employer to provide health insurance.
3. Consider working with your health care benefit professional to develop a survey that measures employees' preferences among health plan features. You may want to use some level of joint analysis or joint modeling to assist you in your survey.
4. Evaluate your health insurance plan or administrator based on the ability to provide comprehensive information on cost, effectiveness and patient safety.

Steven G. Cosby is a group insurance broker, consultant and policy expert on health care. He can be reached at steven@cosbyig.com or 703-282-4116.