Functional Approach to Evaluating Health Care Plans

A thorough evaluation of employee needs, company compensation philosophy, and other considerations, in a functional approach model, are critical steps before adopting any managed care plan. Like the managed care spectrum analysis, using a functional approach to evaluating health plans provides a way to compare plan sponsor needs and objectives across the spectrum of health plan alternatives.

1. Planning orientation addresses the plan sponsor's readiness to implement a health care program that requires a long-term commitment. Indemnity and PPO plans are better in a shorter-term orientation because changes in plan design can be adopted fairly easily without a large disruption to the membership population. HMO and POS plans are typically less flexible in plan design, and because members are required to select a PCP, they may be more reluctant to switch physicians if the plan sponsor later decides to change managed care plans. Thus, the plan sponsor must be fairly comfortable with the HMO or POS plan at the outset and be willing to avoid frequent intervention.
2. Member satisfaction is often difficult to obtain because there are many aspects to satisfaction: provider access, quality of care, claims processing, member service responsiveness, and adequate and appropriate communications. Managed care plans require greater member understanding of process and procedure than do traditional plans and often limit choice; initial member satisfaction is commonly not high. However, as participation grows, members usually reach a comfort level with how managed care operates. HMO membership survey results show improving satisfaction rates. This seems to be particularly true among longer-term members.^[19] It is important for the plan sponsor to understand and address member concerns with managed care. In today's environment of negative public peception of managed care as an industry, it becomes even more important for the plan sponsor to focus on those items most critical to their employees. This often requires deliberate and frequent two-way communications (e.g., the use of focus groups) and regular surveys to ascertain how changes to the healthcare plan are being perceived.
3. Provider choice becomes more restricted as managed care becomes stronger. Most employees are concerned with being able to select their physicians without outside interference and to choose when, where, and how to receive health care services. Managed care products are deliberately designed to steer members to more cost-effective providers and treatment settings, which limits freedom of selection. HMOs and POS plans, which require the use of a PCP to access services, are the most restrictive. However, members who are pleased with their PCPs may not express dissatisfaction with this aspect of the plan.
4. Cost savings, as discussed in the managed care pricing analysis above, is best achieved with stronger form managed care plans, which have proven abilities to control both the price and use components of the cost equation.
5. Cost containment features are more prevalent and stronger with stronger forms of managed care programs. In particular, it is important to understand precisely what forms of pricing and utilization management are used by the managed care company, to know if those will have an impact on the healthcare cost patterns of the employee population.
6. A broader range of financial reporting/funding alternatives is generally more available with fee-for-service and PPO plans because these plans typically reimburse providers on a "reasonable and customary" or fee schedule basis. Some POS and HMO plans can offer funding alternatives; however, commercial HMOs are typically restricted, by statutory regulation, to offering only prospective funding. Furthermore, the extent to which HMOs reimburse providers on a capitated basis affects the value of experience rating to the plan sponsor; that is, claim payments are more or less equal to the sum of prospective cap payments made to providers. HMOs commonly have had difficulty in providing detailed utilization and cost reports because of the nature of paying on a capitated basis.