The Impact of Managed Care Legislation: An Analysis of Five Legislative Proposals from California

Health Policy Economics GroupPrice Waterhouse LLP

November, 1997

Executive Summary

Managed care has grown tremendously in recent years. From 1988 to 1997, at firms with 200 or more employees, the proportion of employees enrolled in HMOs nationwide increased from 18 percent to 33 percent. The presence of managed care varies by state across the country but is particularly strong in California where the proportion of HMO enrollment is more than 50 percent of the private insurance market in several large metropolitan areas. For example, in Sacramento, 92 percent of those with private insurance are enrolled in HMOs; in San Francisco and San Jose, the proportion is more than 68 percent.

As managed care has grown, in California and throughout the country, complaints against managed care plans have also mounted. Patients have raised concerns that managed care plans deny necessary coverage or provide access to mainly lower quality services. Physicians and other providers have expressed concerns that managed care plans may dictate care, monopolize the marketplace, and exclude independent practitioners. As a result, legislation aimed at addressing some of these concerns has been proposed at the federal and state levels.

This report presents results from a study conducted by Price Waterhouse LLP which was commissioned by The Henry J. Kaiser Family Foundation. The purpose of the study was to assess the impact of managed care reform legislation on HMOs and their enrollees. Specifically, the study analyzes five areas of California legislation: insurer liability, use of drug formularies, mental health parity, direct access to obstetric and gynecologic services, and lengths of stay for mastectomy patients. For each of these areas, the paper examines the specifics of the legislative bills in California, the likely impact of the legislation on HMOs by organizational type, and the corresponding effects for consumers.

Measuring the Impact of Managed Care Legislation

For the most part, many of the concerns about managed care plans have arisen because of the nature of the services provided by these plans. Managed care plans offer a lower-cost alternative to traditional, fee-for-service health insurance. Managed care plans are able to keep costs low through the use of various cost-saving strategies. For example, most HMOs limit access to providers by the use of a gatekeeper, usually a primary care physician, who must give prior approval before enrollees receive services from other providers, such as hospitals and medical specialists. Managed care plans also engage in practices of limiting the types of services provided to enrollees. For example, they may deny coverage for diagnostic tests and other procedures that the plan determines not to be medically necessary. They encourage outpatient treatment rather than inpatient care, and, when inpatient treatment is necessary, they encourage short hospital stays. The purpose of much of the recently proposed legislation is to protect consumers from some of the least desirable features of managed care cost-saving practices.

Managed care legislation, like most consumer protection, has positive and negative aspects. On the positive side, most of the proposals are intended to improve access to health care providers and medical services. As an example of managed care legislation, health plans could be required to give enrollees access to any provider that they choose. This would increase access to a variety of providers and have positive benefits for enrollees. On the other hand, this type of legislation might be costly to HMOs and other managed care organizations. If HMOs incur increased costs as a result of legislation, they would likely reduce covered services or increase enrollee premiums and/or out-of-pocket costs. If HMOs increase their rates, or reduce benefits, then some enrollees may decide to enroll in traditional insurance plans. In the extreme, managed care regulation could make managed care noncompetitive with traditional, fee-for-service insurance.

Difference in Impact by Type of HMO. The impact of consumer protection legislation may vary depending on the type of managed care plan. There are four basic types of HMOs:

• Staff model-Physicians practice as employees of the organization, frequently in an office comprised of only HMO staff.
• Group model-The managed care organization pays a physician group a negotiated, per capita rate which the group then distributes among the individual physicians.
• Network model-HMOs contract with two or more group practices and usually pay a fixed monthly fee per enrollee.
• Independent practice/physician association (IPA) model-HMOs contract with individual physicians in independent practice or with associations of independent physicians.

Because the physician and the plan are much more integrated in staff and group model HMOs than in IPA and network model HMOs, staff and group model HMOs are most likely to be able to manage care as well as coordinate and control the behavior of plan physicians. IPA and network model HMOs, on the other hand, are more loosely designed and thus are more limited in the methods by which they can control plan physicians.

For the most part, legislation aimed at reforming managed care seems directed toward HMOs. Although there are forms of managed care plans other than HMOs-such as preferred provider organizations (PPOs) and point-of-service plans (POSs)-that may be impacted by health care legislation, this study primarily focuses on the impact of managed care legislation on HMOs.

ERISA. The impact of state managed care legislation could be limited because of preemptions under the Employee Retirement Income Security Act (ERISA) of 1974. ERISA provides a broad federal preemption of state laws that relate to employee benefit plans. State insurance laws, however, do not fall under this preemption. Thus, state laws may affect non-self-insured employer-sponsored plans through regulation of the insurers. Because of ERISA, non-risk-bearing networks contracting only with self-insured plans and the self-insured plans themselves are exempt from complying with state managed care legislation. With respect to liability, however, both non-self-insured and self-insured plans can be shielded by ERISA from state attempts to expand insurer liability. Plaintiffs are permitted to sue only for the value of the benefit denied. They are not permitted to sue for other damages under ERISA. Because of ERISA preemptions, the effects of state-level managed care reforms would be limited since many employer-sponsored plans will not be affected by these reforms. Only the federal government can enact legislation that governs all managed care plans.

Insurer Liability

Background. Traditionally, insurance plans have not been the target of liability suits since they have not been viewed as being participants in the decision-making process regarding the treatment of patents. With the evolution of managed care, this has changed. By definition, managed care plans manage patient care. The plans not only reimburse a portion of the medical expenses incurred by a patient, they may also greatly influence a patient’s treatment. As a result, recently, there has been a legislative movement to hold managed care plans legally accountable for their role in the decision-making process of patient care. The concept behind the legislation is the idea that if managed care plans face a greater potential for lawsuits, they will be more likely to make decisions that are in the best interest of their patients.

Legislation. Insurer liability legislation has been introduced in the U.S. Congress and in numerous states. In 1997, the California legislature considered five bills related to insurer liability. Three of the bills-SB 324, SB 557, and AB 794-extend liability to managed care organizations by expanding the definition of the practice of medicine to include decisions regarding the medical necessity or appropriateness of any diagnosis, treatment, operation, or prescription. Among other actions, AB 794 also requires that health plans make available to the public, upon request, the criteria used by plans to determine whether to deny or authorize health care services. A fourth bill, AB 536, solely requires plans to make available to the public, upon request, the criteria used in deciding whether to deny or authorize care. The fifth bill, AB 977, provides that a health care service plan would be liable for damages for harm to an enrollee that is caused by the plans failure to exercise ordinary care or caused by decisions made by employees, agents, ostensible agents, or certain representatives of the health care service plan.

Impact. In this study, we assess the impact of expanding liability to managed care organizations through legislation. We find that the impact of expanding malpractice to managed care plans has the potential to greatly reduce their ability to control costs through case management, especially for group model HMOs, but the actual impact may be negligible because of a number of mitigating factors.

First, most employer-sponsored plans may be able to avoid liability by claiming the ERISA preemption. Second, to the extent that group model HMOs are currently being successfully sued in California, then the potential for additional lawsuits may be slight for those HMOs. Therefore, the impact of managed care liability legislation may mainly be limited to a subset of IPA model HMOs, but the effect on these HMOs would be modest. We estimate that at the most, premiums of IPA model HMOs would increase from 0.1 to 0.4 percent.

To the extent that management efficiency is reduced as a result of expanded liability, enrollees would likely gain access to care that they otherwise would not have received. Some of this care may be appropriate and necessary, thus improving the quality of treatment for some enrollees.

Use of Drug Formularies

Background. In the early 1990s, many managed care organizations adopted the use of drug formularies as a method for reducing the costs of prescription drug coverage. A formulary is a list of drugs, rated on clinical and cost criteria, that have been approved and are covered by the plan for treatment of particular illnesses. As a result of concerns about the effects of formularies on managed care enrollees, various forms of legislation have been created.

Legislation. In 1997, more than 40 bills concerning drug formularies have been introduced in more than 25 states. In 1997, the California legislature considered three bills that address issues related to drug formularies: SB 625, AB 974, and AB 1333. SB 625 requires that plans provide an expeditious process by which prescribing providers may obtain authorization for a medically necessary nonformulary prescription drug, make known to the enrollee any reason for disapproval, and make available their formularies upon request. AB 974 requires that a plan provide coverage for a drug if coverage for that drug had been previously approved by the plan for the enrollee and if the drug continues to be prescribed by the physician. AB 1333 prohibits a plan from requiring physicians to prescribe a drug from the formulary if the appropriate drugs from the formulary have been tried and have been unsuccessful in treating the patient.

Impact. By making the consumer better informed, legislation such as SB 625 may enable enrollees in managed care plans to have more negotiating power regarding their treatment, but we do not expect large financial consequences for managed care plans. Based on our assumption that formularies enable plans to save money by providing the most cost-effective medications, as a result of AB 974 and AB 1333, we would expect HMOs (particularly IPA model HMOs) to incur increased costs. Because these bills are limited in scope, the resulting increases in premiums for HMOs would be fairly modest-most likely significantly less than 0.6 percent. In general, both AB 974 and AB 1333 provide certain enrollees easier access to nonformulary drugs while not having a significant impact on the financial stability or the management style of HMOs.

Mental Health Parity

Background and Legislation. The idea of requiring parity in health insurance coverage for mental disorders has been a much debated issue in recent years. In 1996, President Clinton signed into law the Mental Health Parity Act of 1996 which amended ERISA and the Public Health Service Act to provide parity between annual and/or aggregate lifetime dollar limits on mental health benefits with the limits on medical and surgical benefits of group health plans. Various forms of mental health parity legislation have been passed in numerous states. In 1997, the California legislature considered AB 1100 which would mandate health care plans to cover biologically based severe mental illnesses for enrollees of all ages and cover serious emotional disturbances of children under the same policy terms and conditions applied to other medical conditions.

Impact. As a result of AB 1100, those with severe biologically based mental illnesses and children with serious emotional disturbances would likely obtain improved access to mental health services, since their conditions would be subject to the same policy coverage as other physical illnesses. These enrollees would be likely to use more mental health services which, in turn, would lead to increased costs for the health plans.

We estimate the increase in premiums resulting from these increased costs would be approximately 2.1 percent for all plan types in California. Specifically, we estimate that there would be a 1.0 percent premium increase for HMOs, 2.7 percent increase for PPOs/POSs, and 3.6 percent increase for fee-for-service plans.

This bill would also increase the market share for managed care plans since those plans would have lower increases in premiums than traditional fee-for-service plans. Furthermore, since HMOs, particularly group models, are good at managing care, enrollees may not experience as significant an increase in access to mental health services as those in fee-for-service plans. The effects of parity would fall more strongly on fee-for-service plans which use the limits on services to control costs instead of case management techniques which are the mainstay of managed care. For that reason, the mental health parity legislation would tend to increase enrollment in HMOs.

Direct Access to Obstetrical and Gynecological Services

Background and Legislation. As with care from other specialists, many HMOs require that a woman have a referral from her primary care physician to see an obstetrician and gynecologist. However, many have argued that women should have direct access to obstetricians and gynecologists who, in many situations, are viewed as primary care physicians. Legislation providing some form of such access has been passed in many states. In 1994, California enacted legislation enabling women to choose an obstetrician and gynecologist as their primary care physician. In 1997, the Assembly and the Senate in California passed legislation (AB 1354) that would have required health plans to provide women with direct access to obstetrical and gynecological services, but that bill was vetoed by the Governor.

Impact. Given that women in California could already choose obstetricians and gynecologists as their primary care physicians, we estimate that AB 1354 would result in slightly higher premiums and out-of-pocket costs for HMO enrollees, approximately a 0.35 percent increase.

At the same time, enrollees would benefit from easier access to obstetrical and gynecological services and, in some circumstances, would benefit from improved quality of care. We expect similar impacts on both IPA model and group model HMOs. However, this type of legislation could have a longer-term impact on managed care that would be much larger in magnitude, if it sets in motion other legislation that would hinder the ability of managed care plans to limit access to specialists other than obstetricians and gynecologists.

Lengths of Stay for Mastectomy Patients

Background and Legislation. Since the 1996 passage of federal legislation mandating lengths of stay for maternity visits, mandating lengths of stay for mastectomies has become a common area for managed care legislation. In response to increased outpatient surgeries and decreased inpatient lengths of stays for mastectomies, legislation mandating minimum hospital stays has been introduced at both state and federal levels. In 1997, the California legislature considered bills that would mandate that the hospital length of stay for mastectomies be determined by the physician in consultation with the patient and those that mandate a 48-hour minimum stay.

Impact. We estimate that if a 48-hour minimum stay for mastectomies were enacted, the mean length of hospital stay for mastectomies would increase by 11 percent, from 2.0 days to 2.2 days. This estimation is based on the assumption that 25 percent of the short-stay patients-those who would have previously stayed less than 48 hours-elect to stay the full 48 hours if this legislation is enacted. In terms of an increase in health plan premiums, we estimate that the 48-hour minimum stay would result in only a one-hundredth of a percent (0.01%) increase in premiums, for both IPA model and group model HMOs. We would expect a similar increase in California and nationwide.

Conclusion

Based on our analyses, we were able to draw several conclusions which we hope will provide a starting point for further analyses of these proposals as well as other proposals that would regulate this industry.

First, proposals for managed care reforms improve some aspect of medical care or access to services for enrollees in managed care plans. Every proposal that we considered would, to some extent, force HMOs to offer more and/or better services to enrollees.

Second, proposals for managed care reforms tend to increase health plan costs and raise premiums. More services implies higher benefit costs for health plans. The plans, in turn, pass the costs along in the form of higher premiums. We estimate only small premium increases as a result of specific pieces of managed care legislation. However, if a large proportion of current managed care legislation were enacted, then the impact might be very large premium increases accompanied by a large shift in enrollment to fee-for-service plans. The impact of legislation, however, would likely vary according to type of HMO.

Finally, the impact of state managed care legislation could be severely limited by ERISA which enables self-insured plans to avoid compliance with state legislation. Furthermore, under ERISA, both self-insured and non-self-insured plans can avoid the attempts of states to expand insurer liability. In order to ensure that reforms affect all health plans, legislation would have to be passed at the federal level.

* * *A full copy of the report can be ordered by calling the Kaiser Family Foundation’s publication request line at (800) 656-4KFF and asking for document #1342. A report on Managed Care Plan Liability: An Analysis of Texas and Missouri Legislation is available separately. Return to top

The Impact of Managed Care Legislation: An Analysis of Five Legislative Proposals from California

Managed Care Plan Liability: An Analysis Of Texas And Missouri Legislation Library Index

Is There A Managed Care “Backlash?”

Embargoed for release: 9:30 a.m. ET, Wednesday, November 5, 1997

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Most Americans Give Their Own Health Plan A Good Grade, But Have Concerns About Key Aspects Of Managed Care

Washington, DC — At a time of expanding enrollment and stricter federal and state regulation, how does the public feel about managed care? Most insured Americans — regardless of whether they have managed care or traditional coverage — give their own health plan a letter grade of “B” or higher. However, majorities of the public also say they are concerned about key aspects of managed health care. According to a new national survey by the Kaiser Family Foundation and Harvard University:

• A majority of Americans (59%) say managed care plans have made it harder for people who are sick to see medical specialists (25% say easier);
• Half (51%) say managed care has decreased the quality of care for people who are sick (32% say increased);
• Three out of five (61%) say managed care has reduced the amount of time doctors spend with patients (16% say increased);
• A majority of people in managed care — 55 percent — say they are at least “somewhat worried” that if they were sick their “health plan would be more concerned about saving money than about what is the best medical treatment;” 34 percent of those with traditional health insurance coverage feel this way.

One area where managed care does come out on top is preventive care: nearly half (46%) of people say managed care has made it easier to get services such as immunizations, health screenings, and physical exams (31% say harder).

The survey also found that people seem to generalize from anecdotal reports in the news about problems with managed care. When asked about specific examples taken from news stories about the problems some people have reported to have had with managed care, the public’s perception is that these are fairly common occurrences. For example, two thirds of Americans believe that a Health Maintenance Organization (HMO) holding back on a child’s cancer treatment is something that happens “often” (26%) or “sometimes” (40%). Two out of five (39%) think newborn babies being sent home after just one day because of a managed care plan’s policy, in spite of mothers’ concerns, happens “often;” an additional third (34%) think this occurs at least “sometimes.”

“Managed care is winning in the health care marketplace, but it is in danger of losing the battle for public opinion,” said Drew E. Altman, Ph.D., President, Kaiser Family Foundation.

More people — 34 percent — think managed care health plans do a “good job” in serving health care consumers than think do a “bad job” (21%). However, overall, other health care groups are viewed far more favorably than managed care health plans: solid majorities of Americans think nurses (83%), doctors (69%), hospitals (61%), and pharmaceutical companies (62%) generally do a “good job.” For many people, though, the jury is simply still out: 32 percent have no opinion about the kind of job managed care health plans are doing.

Who Benefits from Managed Care Savings?

Many people perceive the cost savings from managed care as benefiting both employers (56%) and individuals (49%), but it is the health insurance companies themselves that most (72%) say reap the rewards in the form of greater profits. Few Americans believe the trend to managed care has had a significant impact on the overall cost of health care in this country, with most — 55 percent — saying they don’t see that it has made much of a difference; 28 percent say it has helped bring down costs.

Should Managed Care Be Regulated?

In recent weeks, the push for regulation of managed care has intensified with some industry leaders now calling for “legally enforceable national standards.” The President’s Advisory Committee on Consumer Protection and Quality in the Health Care Industry is also expected to soon release a “consumer bill of rights.” A slight majority of Americans — 52 percent — say the government should protect consumers of managed care; 40 percent say such intervention is not worth the increased costs that would result. When asked who they would “most like to see managed care plans regulated by,” the public is divided over whether the government — federal (19%) or state (18%) — or an independent organization (34%) should regulate the industry. Sixteen percent (16%) maintain that managed care plans should not be regulated at all.

Managed … What?

Few Americans are familiar with some of the key terms used in debates over health care policy. A sizeable percentage of people — 28 percent — have never heard of “managed care” (45% know what it means; 26% have heard of it but are not sure what it means). “Fee-for-service” is even less recognized: while 41 percent say they know what it means, 43 percent say they have never heard the term (15% have heard of it but are not sure what it means). HMOs are more familiar: 62 percent say they know what it means (24% have heard of but are not sure what it means, and 14% have never heard the term).

Comparing the Views of Managed Care Enrollees with People in Traditional Health Plans

People in managed care are more worried than those with traditional coverage when it comes to the perceived motivations of their health plans. Insured respondents under 65 in this survey were grouped into three categories based on their health care coverage: “heavy” managed care, reflecting the most restrictive arrangements; “light” managed care, reflecting less restrictive arrangements; and “traditional” fee-for-service plans. Three out of five people (61%) in “heavy” managed care say they would be at least “somewhat worried” that their health plan would be more concerned about saving money than providing the best treatment option if they were sick. Fifty-one percent (51%) of those in “light” managed care agree. By comparison, 34 percent of those with traditional coverage report a similar anxiety; 62 percent say they would not be overly worried that cost might affect medical care.

“People in managed care are much more anxious than those in traditional plans about whether or not their insurance plan will pay for what they need when they are sick,” said Robert J. Blendon, Sc.D., Professor of Health Policy at Harvard University. “Members appear satisfied with their plans today, but are concerned about what might happen to them in the future.”

While most insured Americans say they trust their health plan to do the right thing at least “most of the time,” those in traditional health plans have a greater degree of confidence than those in managed care that this is “just about always” the case (55% in traditional plans vs. 30% in “heavy” and 31% in “light” managed care).

Managed care enrollees are more likely to have cost concerns than those in traditional fee-for-service plans. While 69 percent of people in traditional health insurance say they think it would be “very likely” that their plan would cover most of the cost of serious illness, by comparison 44 percent of those in “heavy” and 54% in “light” managed care are equally sure their plan would pay. Similarly, three quarters (78%) of those with a traditional plan say it is “very likely” that a visit to the emergency room would be covered, while fewer of those in managed care (56% in “heavy” and 63% in “light”) are as confident their plan would pay.

While managed care enrollees appear more anxious about their health plan than those with traditional health care coverage, people with all types of insurance coverage grade their plans generally favorably. Twenty percent (20%) of those with “heavy” managed care give their plan a letter grade of “A,” 44 percent give a “B;” about the same percentages given by those with “light” managed care (“A” 24%, and “B” 44%). Slightly more people with traditional health insurance give an “A” (33%), and 43 percent give a “B.”

How Type of Health Care Coverage was Determined.

Because many people are unsure — or don’t know — what kind of health insurance they have, insured respondents under 65 in this survey (778 respondents) were asked a series of questions about their health plan to establish what kind of coverage they have. They were asked if they were required to do any of the following by their plan: choose doctors from a list and pay more for doctors not on the list; select a primary care doctor or medical group; and/or obtain a referral before seeing a medical specialist or a doctor outside of the plan. Respondents were listed as being in “heavy” managed care if they reported their plans had all of the characteristics described above (34% of the sample). Respondents were listed as being in “light” managed care if they reported their plans had some but not all of the characteristics listed above (45% of the sample). And, respondents were listed as having “traditional” insurance if they reported their plans as having none of the characteristics (21% of the sample).

Shaping Public Opinion: Personal Experience, Family, Friends, and the Media

People say that their feelings about managed care — favorable as well as unfavorable — are more likely to be based on personal experiences and what they have heard from family members and friends than on media coverage. Two thirds of those who say they think managed care plans generally do a “bad job” serving consumers report that the main reason they feel this way is their own experience (39%) or what they have heard from family or friends (32%). Similar percentages of people who think managed care is doing a “good job” say the same thing (35% say own experience, 32% say family or friends). About a quarter say media coverage of managed care has most influenced their views. Those with unfavorable impressions of managed care are again as likely to cite the media (22%) as those with more favorable opinions (24%).

Media coverage of HMOs or managed care is largely seen by the public as “fair” (54%) and as including a mix of favorable and unfavorable stories (57%). Most people — 56 percent — say they have personally seen at least “some” media coverage about managed care in the past year.

Methodology

The Kaiser/Harvard National Survey of Americans’ Views on Managed Care is a product of the Kaiser-Harvard Program on the Public and Health/Social Policy. It was designed and analyzed by researchers at the Kaiser Family Foundation and Harvard University. The survey was conducted by telephone by Princeton Survey Research Associates with 1,204 adults nationwide between August 22 and September 23, 1997. The margin of error is plus or minus 3 percent for the national sample.

The Kaiser Family Foundation, based in Menlo Park, California, is a non-profit, independent national health care philanthropy and is not associated with Kaiser Permanente or Kaiser Industries. The Foundation’s work is focused on four main areas: health policy, reproductive health, and HIV policy in the United States, and health and development in South Africa.

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National Election Night Survey of VotersPress Release Survey Chart Pack

Note: This publication is no longer in circulation. However, a few copies may still exist in the Foundation’s internal library that could be xeroxed. Please email order@kff.org if you would like to pursue this option.

An Annotated Bibliography of Sentinel Articles

• Report:

A booklet to help health care consumers understand managed care.

• A Consumer’s Guide: Understanding Managed Care

The September/October 1997 edition of the Kaiser Family Foundation/Harvard Health News Index includes questions about major health stories covered by news media, including questions about AIDS, Condoms in Schools and Tobacco Companies. The survey was based on a national random sample of 1,007 Americans conducted October 17-21, 1997 which measures public knowledge of health stories covered in the news media the previous month. The Health News Index is designed to help the news media and people in the health field gain a better understanding of which health stories in the news Americans are following and what they understand about those health issues. Every two months, Kaiser/Harvard issues a new index report.

• Report: A Comparison of the Medicaid Provisions in the Balanced Budget Act of 1997 (P.L. 105-33) w-Prior Law

Background

Health care benefits had been offered to active employees for a long period of time before health coverage became a retiree benefit offered by employers. The key event that made employer-sponsored retiree health care a possible benefit for retirees was the enactment of Medicare in 1965. It was then felt possible to provide a widely desired benefit at a relatively low cost, since the Medicare program would pay the majority of the costs.

Millions of Retirees Have Employer-Sponsored Coverage

Based on the 1995 Medicare Current Beneficiary Survey⁵ analysis by Physician Payment Review Commission (PPRC), about 12 million individuals (37 percent of Medicare aged and disabled beneficiaries) have employer-provided supplemental coverage, including about 2 million with employer-provided coverage and Medigap.

Retiree Health Is a Highly Valued Medicare Supplement

As with other matters related to retirement, the appreciation of retiree health benefits increases with age. For example, based on a Hewitt database of employee surveys, there is a twelve-fold increase in value assigned to retiree health care benefits for employees age 55 and over compared to the group age 25 to 34.⁶

The availability of employer-provided coverage is more critical for the pre-65 retirees because they will generally not have access to other insurance or it will be very expensive for them to purchase, if it is available at all. Post-65 retirees at least have Medicare if they have no other health insurance.

Even Medicare, however, provides a relatively low level of benefit when compared to the typical employer plan for active employees. Comparing the Medicare level of benefits to 250 large employers participating in the 1996 Hewitt Health Value Initiative^TM who offer indemnity type benefits, the Medicare design falls in the lowest quartile measured by plan value (18th percentile). That is, 82 percent of the indemnity plans offered by large employers to active employees provide richer or better benefit levels than traditional Medicare. Most of the employers participating in the 1996 Hewitt Health Value Initiative have more than 5,000 employees. Employers with fewer employees will tend to provide a lower level of benefit.

Assuming that the typical employer medical plan considers about 65 percent of total health care costs as a cost covered by the medical plan (excluded costs include items such as over-the-counter drugs, dental care and eye glasses)⁷, and that the average indemnity medical plan reimburses about 83 percent of covered costs⁸, the typical employer plan will pay 54 percent (0.83

State Reforms of Small Group Health Insurance

Between 1989 and 1995, 45 states enacted laws to make health insurance more accessible and attractive to small businesses. The small group market was targeted for reform because about half of all uninsured workers are either self-employed or working in firms with fewer than 25 employees (EBRI, 1996).

The problem is that only about half of all small firms offer health insurance (Figure 1). In 1995, 53% of small businesses (<50 employees) offered health benefits, and while this is up from 1989 when only 41% offered coverage, it is still much lower than health coverage among larger firms.

Many insurers are willing to sell coverage to small firms, but some insurer practices in the small group market have drawn concern. Some companies refused to sell policies to businesses in specific “high-risk” industries for example, or to firms with fewer than 10 employees. Also, because insurers tended to base premiums for small groups on the medical histories of prospective enrollees, some small businesses have reported that the poor health of their employees or employees’ dependents resulted in their inability to qualify for coverage.

Although these problems exist, they are not widespread. Most small firms say that they can get coverage if they want it. More than three-quarters (of both insured and uninsured small firms) say that they have been solicited to buy health insurance in the last six months, and more than a third indicate that they have received at least six or more inquires.

Three General Types of Small Group Reform

“Bare-bones” policies.

These laws allow insurers to sell “bare-bones” insurance to certain classes of small firms, typically those newly entering the group coverage market. The policies are dubbed “bare-bones” because they are usually exempt from most mandated benefit laws and premium taxes, which allows small firms to purchase basic coverage at lower premiums.

Premium regulations.

Premium rating bands or requirements that insurers follow community rating are two examples of such regulations. These rules are intended to narrow the range in premiums, so that coverage will be more affordable for higher-risk firms.

Standards for underwriting and contracting practices.

These are designed to make coverage both more attractive and available to employers. Included under this category are laws which:

• limit the non-issue of policies to certain types of firms,
• guarantee the renewability of employer coverage,
• allow insured persons to move between plans without having to satisfy new pre-existing condition clauses, and
• limit initial waiting periods that workers must satisfy for coverage of their pre-existing conditions.

The most common reforms are listed in Figure 2 with the number of states that have enacted them. In many cases, the state enacted a small package of measures in 1991 or 1992 and then adopted additional reforms a couple of years later. By 1995, most states had enacted all of the reforms listed here.

Figure 2Small Group Reforms at the State Level Number of States with the Measure as of: Type of State Legislative Reform: ’89 ’91 ’93 ’95 Bare-Bones Insurance Plans Can be Sold 1 9 31 43

Talking About STDs with Health Professionals

Women’s Experiences

More than 12 million new cases of sexually transmitted diseases (STDs) other than HIV/AIDS, including three million among teenagers alone, occur every year. At current rates, at least one person in four will contract an STD at some point in his or her life. With as many as 56 million individuals – more than one in five Americans – estimated to be currently infected with an incurable viral STD such as herpes or genital warts, STDs remain a serious health threat in this country. In fact, STD rates in the United States are the highest in the industrialized world, and are higher than in some developing countries.

More than 1 in 5 Americans is estimated to be currently infected with an incurable viral STD.

Source: Centers for Disease Control and Prevention, 1993While public education efforts by the Centers for Disease Control and Prevention (CDC) and the American Social Health Association (ASHA) along with the release of studies such as the one issued November 1996 from the Institute of Medicine (IOM), The Hidden Epidemic: Confronting Sexually Transmitted Diseases, have helped to focus greater national attention on the STD epidemic, the general public remains largely unaware of the prevalence and risk of STDs. In a Kaiser Family Foundation survey conducted at the time of the release of the IOM report, less than a quarter of Americans over the age of 18 when asked what STDs they were aware of, named chlamydia – the most common STD and, according to the CDC, the most prevalent reportable infectious disease of any kind. Just 2 percent could name trichomoniasis or ‘trich,’ the STD with the second highest incidence in the U.S., at 3 million estimated cases annually. One in ten respondents could not name any STDs. Perhaps even more disconcerting was how limited most Americans’ knowledge is about the link between STDs and HIV, with more than half (56%) of respondents unaware that STD infections increase susceptibility to the HIV virus.

Another survey by the Foundation conducted with Glamour magazine earlier this year also found that many women may be mistakenly assuming they are being screened for STDs during routine gynecological exams. Two out of five women 18-44 years old (42%) said they believed they are automatically tested, that is without requesting it, for at least some STDs other than HIV as part of their regular gynecological exams. A pap smear – the primary purpose of which is to screen for cervical cancer – can also detect genital warts, in some cases. However, the test does not detect other more common STDs such as chlamydia, gonorrhea, and trich. Specific STD screening and testing is generally at the discretion of the doctor or at the request of the patient. Although the American College of Obstetricians and Gynecologists (ACOG) recommends testing for STDs other than HIV for women at ‘risk’ for STDs (defined in general as women who have a history of STDs or of multiple sex partners), routine screenings are not necessarily always – or ever – included as part of a woman’s routine exam.

Building on this previous study as well as on anecdotal evidence that many women may not always be getting the care they assume they are getting or even assessing their own risk appropriately when it comes to STDs, Kaiser Family Foundation and Glamour partnered again for a second survey to learn more about how women and their health providers approach the issue of STDs during gynecological or obstetrical visits. In particular, we were curious to learn about how often and with which patients doctors and other health professionals are discussing STDs, whether health providers are counseling women on the risk factors for STDs, and how women feel about their experiences talking about – or not talking about – STDs with their health provider.

The topics asked about are based on ASHA’s Personal Health History form and ACOG’s Guidelines for Women’s Health Care. To attempt to answer these questions, staff at the Foundation in coordination with Glamour magazine staff devised a survey that queried 482 women between the ages of 18-44 who had been to a new doctor within the last year for gynecological or obstetrical care. Criteria used to select the sample were based on an assumption that the first gynecological or obstetrical visit with a new patient was the one most likely for doctors or other health professionals to discuss STDs.

The survey found that not only do STDs rarely get discussed during gynecological or obstetrical visits, but many women may not be adequately screened by their health providers for their risk of STDs. The survey also indicated that women generally expected STDs to be discussed with them by their provider as part of routine reproductive care, and that many are very receptive to automatic testing even at additional costs. A summary of the key findings follows. The survey is also reported on in the October 1997 issue of Glamour.

What the Experts Say…According to the American Social Health Association (ASHA), information on sexual history is integral to assessing a patient’s risk for STD infection. In fact, questions about sexual history are part of an STD risk assessment form developed by ASHA for use by doctors. A woman’s number of sexual partners is important information her health professional should know, according to Contraceptive Technology (1994) and the American College of Obstetricians and Gynecologists (ACOG) Guidelines for Women’s Health Care (1996). Contraceptive Technology recommends asking every patient how many sexual partners he/she has had in the last year. ACOG’s guidelines also recommend a clinician ask every patient about his/her sexual history and practices, which includes their number of sexual partners. ACOG states that a patient’s number of sexual partners may not only indicate STD risk, but also help determine the best method of contraception for her.Findings:

Many women may not be screened adequately for STDs by their health providers.

Only 15 percent of women of reproductive age say they had a conversation with a health professional about STDs at their first visit for gynecological or obstetrical care. Many of the women who did not have a conversation about STDs reported not providing their health professional with the information he or she would have needed to adequately assess the patient’s risk for STDs, such as:

• 35 percent of these women said they did NOT provide information about whether they were currently sexually active;
• 61 percent said they did NOT provide information about whether they were in a monogamous relationship;
• 67 percent said they did NOT provide information about whether they used condoms regularly;
• 77 percent said they did NOT provide information about how many sexual partners they had had in the last year;
• 94 percent said they did NOT provide information about oral or anal sex.

In fact, one in five of these women (20%) said they did not think their health provider had enough information to make an adequate assessment of their risk. Of those women who did not have a conversation about STDs with a health professional but thought that he or she should have discussed the subject with them, almost one in three (30%) said they did not think their health provider had enough information to accurately assess their risk.

There is also evidence that many women may not be informed about STD risk factors. Significant percentages of women who felt their health provider had enough information to know whether they were at risk for STDs reported that they did not provide basic information about their current and past sexual activity that may have affected that assessment. Because American men and women have such limited knowledge about STDs, many of these women may not know what information specifically their health provider should have gathered from them to assess their STD risk. Given the national estimates for STDs in this country, it is likely that some of these women are under-estimating their risks or may not even be aware of whether they have an STD.

Although most women – 92 percent – filled out a form with questions about their medical history when they saw their new health provider for the first time, only half – 54 percent – said that form included questions about sexual history or current sexual activity even though the purpose of their visit was for gynecological or obstetrical care.

Health providers rarely discuss STDs as part of gynecological or obstetrical visits.

As compared to other reproductive and sexual health topics, such as birth control or breast exams, health professionals initiated conversations about STDs far less often. Only about one in ten (12%) health professionals raised the subject of STDs with a new patient. Eight in ten (83%) believe it is a topic that should be a part of routine counseling when seeing a new doctor for gynecological care.

About a third (32%) of health providers who talked about STDs with a patient recommended testing. Women were most likely to report the provider recommended tests for gonorrhea, HIV/AIDS, chlamydia, and syphilis. Those who did have conversations generally reported being made to feel ‘very comfortable’ about the discussion (76%). Few felt ‘judged’ in any way (94% said no; 6% yes).

Women expect their health providers to raise the subject of STDs.

Most women (64%) say it is up to the health professional to raise the topic of STDs during a gynecological visit. A quarter (23%) say it is primarily the patient’s responsibility to initiate this conversation, and 12 percent say the responsibility is shared. In fact, a third (33%) of the women who did not discuss STDs during their visit thought their health provider should have raised the subject with them.

Eighty-six percent of women who did discuss STDs during their first visit with a new doctor said they felt it was ‘expected’ that the topic would come up. About half (47%) said they were ‘relieved’ once it was discussed.

The Real Facts: The Most Common STDs

STD

Incidence(in US pop.)

Curable?

Symptoms

Long-term Health Effects

Chlamydia4,000,000YesGenital discharge, burning during urination. Women: lower abdominal pain, pain during intercourse. Men: swelling or pain in testicles.If left untreated, may lead to PID

Trichomoniasisor”Trich”3,000,000YesVaginal discharge, vaginal odor, discomfort during intercourse, and painful urination.Inflammation of fallopian tubes, low birth weight and premature infants.

Pelvicinflammatory disease(PID)1,000,000YesDull pain or tenderness in the lower abdomen, abnormal periods, abnormal vaginal discharge, nausea and/or vomiting, fever and chills.Damages the fallopian tubes, making it difficult or impossible for a woman to have children. Increased risk for ectopic pregnancy, chronic abdominal pain, pelvic adhesions (tissue grows which connects internal organs together), pelvic abscesses.

HPVorgenitalwarts500,000 – 1,000,000NoWarts on the vulva, vagina, anus, cervix, penis or scrotum, which may lead to itching, pain or bleeding.Increased risk of cervical cancer.

Gonorrhea80,000YesDischarge from penis, vagina or rectum, and burning or itching during urination. Sore throat.If left untreated, may lead to PID.

Genitalherpes200,000 – 500,000NoItching or burning in genital area; pain in the legs, buttock, or genital area, or vaginal discharge. Flu-like symptoms.Nerve pain, inflammation of spinal cord, urethral strictures, and miscarriage, stillbirth, or non surviving premature infant.

Syphilis101,000YesPainless sore (chancre) on genitals or in vagina, skin rash and flu-like symptoms, mild fever, fatigue, sore throat, hair loss and swollen glands throughout body.In late, or tertiary stage, mental illness, blindness, heart disease and death.

HIV/AIDS80,000NoFlu-like symptoms, such as fever, loss of appetite and weight, fatigue, enlarged lymph modes.Partial paralysis/weakness of muscles, symptoms affecting the spinal cord, lowered resistance to opportunistic infections, increased risk of cervical cancer, and death.

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Talking About STDs with Health Professionals: Women’s Experiences: Report Part One Part Two Press Release Survey