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Are Fortune 100 Companies Responsive To Chronically Ill Workers?
We conducted a survey of Fortune 100 companies to determine their response to the growing number of employees with chronic conditions. We found that although all companies cover some services that are particularly beneficial to persons with chronic conditions, gaps in coverage remain. We also found large variations in cost-sharing mechanisms, number of covered visits, and lifetime maximum benefit provisions, which are especially important to persons with chronic conditions. In general, for persons with chronic conditions the benefits offered by these Fortune 100 companies are superior to those offered by Medicare.
During the past two decades many employers have transformed their health benefit packages in response to their employees’ demands and their own need to limit spending on health.1 Large companies typically have been at the forefront of these benefit changes, which smaller companies have later adopted.2 In this paper we examine how some Fortune 100 companies are structuring their benefit packages to meet the needs of a growing number of employees with chronic health conditions. We focus on persons with chronic conditions because our own analysis of Medical Expenditure Panel Survey (MEPS) data from 1996 suggests that 47 percent of adults ages twenty-one to sixty-five had one or more chronic conditions and that these persons were responsible for more than three-quarters of health care spending in their age group.3 Our analysis also shows that privately insured persons with chronic conditions spend more than twice as much out of pocket as do persons without chronic conditions, and persons with multiple chronic conditions, more than three times as much. During the next thirty years, as the baby boomers continue to age and medical progress prolongs life, the prevalence of chronic conditions is expected to rise further.4 Employers may decide to respond by altering their benefit packages. We conducted a survey of Fortune 100 companies to analyze (1) the degree to which their health insurance benefits, identified as key services for persons with chronic conditions, were offered by these companies; and (2) what benefit limitations, such as cost sharing or up-front benefit caps, were imposed to limit the use of the services covered. Our survey may provide a leading indicator of how well health benefits in employer-sponsored plans are reflecting the needs of a chronically ill population. It also serves as a comparison to the benefit package offered by Medicare and other insurers.
Defining chronic care services. We used several sources of information to develop a list of medical- and health-related benefits that are most important for persons with chronic conditions. First, we identified seven organizations (Alzheimer’s Association, American Academy of Pediatrics, American Diabetes Association, American Geriatrics Society, Family Voices, National Alliance for the Mentally Ill, and National Chronic Care Consortium) that represent providers, clinicians, and advocates for those with chronic conditions. Each organization was asked to identify the benefits deemed to be most important for its constituents. Second, we convened focus groups among a cross-section of Americans, including various groups with specific chronic conditions and caregivers. Third, we reviewed the academic literature on benefits design, focusing on the issues relevant to those with chronic conditions.5 Finally, we examined the benefits (both mandated and optional) offered by state Medicaid programs and those offered by organizations such as the Program of All-Inclusive Care for the Elderly (PACE), social health maintenance organizations (HMOs), and others that offer services to persons with chronic conditions. We then developed a list of benefits particularly important to those with chronic conditions. We excluded services relevant for both acute and chronic conditions from this list. Verifying plan data. We used Fortune magazine’s list of the 100 companies with the highest revenues in 1999 as our sampling frame. Companies were asked to send their health care summary plan descriptions that were available to workers in the spring of 2000. For firms offering multiple plans, we requested information about those offered to salaried employees working at U.S. corporate headquarters. We then selected the plan with the widest andmost flexible set of benefits, regardless of premium. Information from each chosen plan was abstracted onto coding sheets. The abstracted data were sent to the director of human resources (or equivalent person in the company), who was asked to review our summary. We obtained responses from seventy-six companies of the Fortune 100 (a response rate of 76 percent).
Types of plans. Our analysis of the seventy-six plans shows that 12 percent were traditional indemnity plans, 24 percent were point of- service (POS) plans, 57 percent were preferred provider organization (PPO) plans, and 7 percent were HMOs. A nationwide survey of employer-sponsored plans in 2000 found that the distribution nationwide was 8 percent traditional indemnity, 22 percent POS, 41 percent PPOs, and 29 percent HMOs.6
Covered benefits useful to the chronically ill.
Exhibit 1
Cost sharing and other limitations. Prescription drugs. Coverage of prescription drugs, for example, is a benefit upon which many companies have imposed restrictions. In the past decade the range of prescription drugs covered and spending for them have grown at annual rates that were much faster than the overall annual growth rate of private insurance.7 To limit this rapidly growing portion of health care benefits, some employers use cost-sharing mechanisms, formularies, generic drugs, and other pharmacy management techniques. Our study of the Fortune 100 shows that 33 percent of firms require coinsurance for pharmaceuticals; 72 percent require copayments, and the mean copayment per prescription is $5 (Exhibit 2  ). Several studies have shown that the use of cost-sharing mechanisms such as copayments and coinsurance reduces the demand for prescription drugs.8 Two studies found that the impact of such mechanisms seems to be more pronounced for medication used for chronic conditions.9 This finding may be related to the more frequent use of pharmaceuticals by persons with chronic conditions.10 For comparative purposes, it is important to note that the coinsurance amounts among Fortune 100 firms are generally much lower than what is being proposed in most legislative proposals for Medicare drug coverage. 11 All of the Fortune 100 companies use formularies: 72 percent use open formularies, and 28 percent use closed formularies.
Mental health care. All of the companies surveyed covered mental health care services, both outpatient and inpatient. Legislation passed in 1996 requires those employerswho offer coverage formental health care services to do so at parity with the rest of the health services offered.12 This legislation has led some employers not to place limits on dollar amounts but rather to introduce other types of limitations such as the number of inpatient days and outpatient visits covered, to constrain the use of mental health care services.13 Our survey shows that the majority of the companies impose limits on visits and inpatient days for mental health care services: 64 percent impose limits on the number of outpatient visits with a range of ten to ninety visits per year; 63 percent of the companies restrict the number of inpatient days with a range of 20 to 120 days (Exhibit 3 ).
The consequences for employers and employees of cost containment efforts related to mental health care coverage have been studied in various situations, and the conclusions are inconsistent. A nine-year follow-up study of health insurance coverage in a large corporation that changed from fee-for-service with a mental health carve-out to a comprehensive managed care program inclusive of mental health found that the change led to a more than 40 percent decrease in mental health care costs.14 Another study examined a large corporation that implemented cost containment by limiting access to mental health coverage and found that employees with mental health conditions fared worse, productivity declined, and costs increased.15 Some studies have found that increasing mental health coverage will raise insurance costs for all members and will lower rates of health insurance coverage in general among employees. 16 At the same time, studies suggest that there are potential improvements in productivity for employees who have access to coverage of mental health care.17
Skilled nursing/home care.
Nearly all of the companies cover care in skilled nursing facilities. Coinsurance is required by 51 percent of the companies, and none require copayments (Exhibit 2 Other benefits. We found that nearly all companies offer other benefits such as coverage of physical, occupational, and speech therapies, but access to these services is frequently restricted to acute episodes and generally is not designed to provide the services needed by persons with chronic or congenital conditions. For instance, physical, occupational, and speech services are covered only as long as the treatment will help the person to recover functional or physical capacity or show clear signs of improvement in what is frequently called "a reasonable period of time." Current definitions of medical necessity often require that a service greatly improve a person’s health status. However, for many persons with a chronic condition, certain medical services, therapies, and equipment can be needed to maintain their functional capacity, alleviate pain, or maintain quality of life without clear clinical improvement. When medical necessity is limited to those services that improve health status, persons with chronic conditionsmay be denied services that are vital to their functioning independently at home or contributing in the workplace. Telephone interviews with the directors of health benefits of the companies surveyed, however, suggest that some companies may be willing to cover these services for longer periods of time, but only on a case-by-case basis. Three benefits are offered by some but not all companies: family counseling, dietitian-nutritionist services, and medical social worker. Several studies suggest that these benefits are important for persons with chronic conditions.19 In discussions with the directors of medical benefits, we found that some of them cover medical social workers and dietitians in the context of home health care only. In our survey we explicitly differentiated the coverage of professional dietitian-nutritionist services and medical social workers from services covered by home health care. For family counseling, we looked for coverage of professional family group therapists that could address problems such as depression, anger, anxiety, panic attacks, chemical abuse or alcoholism, adolescent behavioral problems, sexual assault, childhood behavioral disorders, and coping with family members suffering from chronic conditions. These services were considered to be distinct from individual mental health coverage. More analysis is needed to determine why some companies offer these benefits while others do not. Profitability, type of industry, and level of unionization are possible explanations. Some benefits such as respite care, personal care, nonemergency transportation, and home modifications are not covered by any of the Fortune 100 firms we surveyed. Telephone interviews suggested great reluctance to add any of these benefits at the present time; however, some companies may provide them on a case-by-case basis.
Health plan components other than those we studied may incorporate deductibles, overall out-of-pocket limits, and lifetime maximums. These provisions can also affect persons with chronic conditions. 20 We found that among the Fortune 100, the average deductible in traditional indemnity plans is $227 for individuals and $498 for families. In PPOs the average in-network deductibles are $261 for individuals and $639 for families; in POS plans, $225 for individuals and $449 for families. According to the Kaiser/HRET 2000 annual survey of employer health benefits, the average deductible in traditional indemnity plans nationwide is $239 for individuals and $545 for families. In PPOs the average in-network deductibles are $187 for individuals and $361 for families; in POS plans, $79 for individuals and $367 for families.21 From this comparison we conclude that the Fortune 100 companies have higher PPO deductibles than do similar organizations nationwide but that deductibles for the other types of plans are similar to the nationwide average. According to the latest data published by the U.S. Department of Labor (1995), our study found that the average individual out-of-pocket limit ($1,510) for the Fortune 100 companies surveyed was higher than the nationwide average ($1,358) for medium and large private firms in 1995; the mean family out-of-pocket limit ($3,122) in our surveyed companies also was higher than the average ($2,858) for medium and large firms. Thirty-six percent of Fortune 100 companies surveyed did not have a lifetime maximum benefit limit in 2000; 27 percent of all medium and large companies nationwide did not have one in 1995.22 Of those Fortune 100 companies that specified a lifetime maximum dollar amount, the mean was $1,603,191. In 1995 nationwide only 9 percent of medium and large companies had lifetime maximum benefits over $1,000,000; 47 percent offered $1,000,000, and the rest specified lower amounts. This higher out-of- pocket limit among the Fortune 100 might represent a financial burden for those with chronic conditions; however, the higher lifetime maximum can be financially beneficial for the chronically ill. From the available data, we did not observe differences in the characteristics of Fortune 100 companies that responded to our survey and those that did not. There were no statistically significant differences by profitability, sales, industry, or number of workers. Our selection of the most generous benefit package offered to employees may overestimate the benefits offered to all employees, especially union employees. The comparisons to Department of Labor data, however, suggest that this may not be a major difference. The fortune 100 companies surveyed offer a wide range of benefits important to persons with chronic conditions and their families. However, not all Fortune 100 companies offer certain benefits, and none of them cover some services deemed critical to persons with chronic conditions. The imposition of cost-sharing mechanisms places potential access barriers and financial burdens on those with a continuing need for medical care. Persons with chronic conditions are much more likely to use medical services, so coinsurance, copayments, and lifetime maximum limits are of particular concern to them. In addition, medical necessity is frequently interpreted not to include services where improvement in the medical condition will not occur, something that happens frequently for those with chronic conditions. The Medicare benefit package was modeled initially after the benefits offered by Blue Cross plans in 1965.23 A comparison of Medicare benefits and Fortune 100 companies’ benefits in 2000 shows that Medicare provides a less generous set of benefits than Fortune 100 companies for persons with chronic conditions. In particular, Medicare does not offer pharmacy benefits; offers more limited durable medical equipment, home health care, and skilled nursing benefits; and, in general, has greater cost-sharing provisions than most Fortune 100 companies do. Given the growing prevalence of chronic conditions in the United States, both private- and public-sector insurers will be challenged to respond to the needs of persons with chronic conditions and their families in the coming years.
The authors are all affiliated with Partnership for Solutions: Better Lives for People with Chronic Conditions, at the Johns Hopkins University in Baltimore. This work was supported by the Robert Wood Johnson Foundation as part of the project Partnership for Solutions: Better Lives for People with Chronic Conditions.
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Data And Methods
Study Findings
