Can’t Help Ourselves Richard Quinn | May 5, 2022
I BECAME INVOLVED with employer health benefits in 1962. Back then, my job was to screen medical claims before sending them to the claims’ administrator for processing. In the decades that followed, I designed, negotiated and managed health plans for a company with 15,000 employees and 4,000 retirees. My job was twofold: to make sure the health benefits were working correctly and to manage costs. The first goal was relatively easy. The second was nearly impossible. It appears that, as of 2022, not much has changed.
Over the past 60 years, I’ve seen many strategies that promised cost savings. In the end, none has actually worked. Providing full coverage, along with paid time-off for second opinions and preadmission testing, were early cost-saving efforts. The idea behind these efforts: Much health care and surgery are unnecessary. But the policies were ineffective, even though unnecessary care is still a real issue.
Self-funding was supposedly going to save money for large employers—but very little, as it turns out. Nearly 60% of large employers are now self-insured. The often-repeated assertion that insurance company profits are a big driver of health care costs is simply not accurate. When you consider all the Americans covered by any number of government plans, plus all of the employees in self-insured plans, you find only a minority of Americans are actually covered by health insurance.
Requiring employees to pay more toward the cost of their coverage was thought to give them skin in the game, so to speak. To ease the resulting burden, the employees’ share of the premiums is typically tax-free—which most employees don’t even realize.
Starting in the early 1980s, health maintenance organizations promised cost savings by keeping people healthy. I was on the board of directors of four different plans. The problem was that the physicians thought they could continue with business as usual. It couldn’t work that way if you wanted savings. Attempting to manage a patient’s care is met with significant resistance from both patient and physician. Any effort to do that is still a major source of discontent.
Giving employees a choice among different types of coverage was supposed to help. It didn’t. It did, however, cause adverse selection because the highest users of health care services typically selected the most generous plans.
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