Driven By Rising Costs, Managed Care Plans Dust Off Practices That Triggered 1990s Backlash, Health Affairs Article Says

Requiring Preauthorization, Profiling Of Physicians’ Utilization Patterns Used More Frequently By Health Plans

BETHESDA, MD — Responding to rising costs, some health care plans are bringing back such unpopular practices as utilization review, increasing out-of-pocket expenses, and steering patients to more cost-effective providers, according to an article published today on the Health Affairs Web site.

Glen Mays, an associate professor in the Department of Health Policy and Management in the College of Public Health at the University of Arkansas for Medical Sciences, and two colleagues analyzed interviews conducted through the Community Tracking Study (CTS) site visits, which monitor health care markets in 12 representative metropolitan areas across the country every two years.

Based on interviews with providers, insurers, employers, and others in the health care markets, Mays and his colleagues found that plans are more often requiring preauthorization for outpatient services and specialist referrals. They also found that plans are reviewing inpatient services while patients are in the hospital in an effort to shorten hospitalizations, and they are reviewing claims to profile providers based on health care use and quality.

Many of these techniques were criticized during the managed care backlash of the 1990s and had been removed from plans as insurers responded to pressure from enrollees and employers. But with premiums rising at double-digit rates, some plans have now begun reintroducing the cost-control measures.

While use of these tools is on the rise, cost-saving changes in benefit design have gotten more attention. Employers and insurers have begun increasing copayments, coinsurance, and deductibles as well as offering lower-cost plans to enrollees who agree to limit their choice of providers or select catastrophic plans with high deductibles.

Among their findings are the following:

—Five plans in four communities have increased their use of preauthorization of outpatient services or procedures
—Four plans in three communities increased use of preauthorization for specialists, while one plan decreased use
—Seven plans in four communities increased use of preauthorization for prescription drugs
—Seven plans in five communities increased their use of concurrent review of inpatient services, while two plans decreased use
—Fifteen plans in nine communities increased their use of retrospective review and provider profiling, while two decreased use

Mays and his colleagues found that changes in benefit design and offering incentives for providers that deliver more cost-effective care are more common approaches to reducing costs and utilization. Among their findings:

—Fifteen plans in six communities are increasing their use of disease management programs, while two are decreasing it
—Eighteen plans in nine communities have increased their use of complex case management programs
—Four plans in three communities have developed limited-network products, and nine plans in six communities have developed tiered-network products
—Thirty-five plans, encompassing all 12 communities studied, have increased deductibles and copayments

Mays says that marketplace acceptance will determine whether health plans can control costs using these tools.

“In the wake of the managed care backlash, most plans remain cautious about imposing new requirements and constraints on hospitals and physicians,” Mays says. “Moreover, health plans lack the bargaining power to impose such requirements on the large, consolidated health care providers that have emerged in many markets.

“Instead, plans are focusing on improving provider relationships through better communication and smoother business transactions,” he says. “Whether these activities will lead to increased provider engagement in cost-containment and care-management activities remains to be seen.”

Mays’ coauthors were Gary Claxton, vice president of the Henry J Kaiser Family Foundation, and Justin White, a research assistant at Mathematica Policy Research. Their research was conducted at the Center for Studying Health System Change and supported by the Robert Wood Johnson Foundation.

In an accompanying article, Timothy Jost, Robert Willett Family Professor at Washington and Lee University Law School (Lexington, Virginia) analyzes the Supreme Court's recent decision, Aetna Health Inc. v. Davila, reaffirming Employee Retirement Income Security Act (ERISA) preemption of state-law damages suits against employee benefit managed care plans.

This decision substantially removes the most significant legal threat that has discouraged ERISA managed care plans from using the utilization review and network control approaches that Mays and his colleagues discuss, although it might further discourage ERISA plans from using alternative managed care strategies such as delegating rationing decisons to treating physicians.

Mays’ article can be read at content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.427.

Jost’s article can be read at content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.417.

Health Affairs, published by Project HOPE, is a bimonthly multidisciplinary journal devoted to publishing the leading edge in health policy thought and research. Additional peer-reviewed papers are published weekly online as Health Affairs Web Exclusives at www.healthaffairs.org. Health Affairs Web Exclusives are supported in part by a grant from the Commonwealth Fund.

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©2004 Project HOPE–The People-to-People Health Foundation, Inc.