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To Save Money, Employers Reduce Number of Plans Offered to Workers

MANAGED CARE January 2002. © MediMedia USA
News and Commentary

To Save Money, Employers Reduce Number of Plans Offered to Workers

MANAGED CARE January 2002. ©MediMedia USA

The days of employers scrambling to provide a choice of health benefits packages to lure and keep employees may be ending. The New York Times reports that large companies across the country are sharply reducing the number of HMOs they offer.

It's an effort to survive in an environment that features rising health care costs and a weakening economy.

Companies now feel that contracting "with everyone in sight" is an idea that backfired, Arleane Baltrusitis, vice president for benefits at American Express, told the paper.

"Twenty years later," she added, "we realized that we had lost any leverage" with HMOs. American Express, which covers 60,000 employees, 6,000 retirees, and their dependents, jettisoned 164 health plans, keeping only 48. With relatively few employees in each local plan, American Express felt that it could not negotiate with HMOs on services and price.

American Express is by no means the only company that feels this way. Sears Roebuck dropped 120 HMOs and kept 65. Xerox removed 92 HMOs from its roster of 222, though employees who are current members of the dropped HMOs have the option of sticking with those plans.

In recent years, as a result of the managed care backlash, employers avoided highly restrictive forms of managed care and offered more choice to employees. This tendency to backtrack appears to be extremely widespread, says Jim Maxwell, health policy director at the JSI Research and Training Institute, who studied the problem for the National Health Care Purchasing Institute.

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