Employment-Based Health Insurance Is Failing: Now What?

Enthoven, Alain C.
July 2003
Health Affairs;Jul/Aug2003, Vol. 22 Issue 4, p10
Academic Journal
The collapse of managed care has created an environment of rising health care costs and growing ranks of uninsured people, along with weakened efforts to give consumers incentives to choose efficient, high-quality providers. In this paper Alain Enthoven, the "father of managed competition," suggests that employers have no strategy to battle the factors driving rising health care expenditures, ranging from drugs and technology; to litigation that makes managed care plans reluctant to limit care; to provider consolidation; to wide networks that don't reward efficient, high-quality care. Enthoven writes that employers created the conditions for managed care's failure years ago, when they largely followed a "single-source" strategy for health care purchasing. Such a strategy failed to give enrollees an incentive to choose low-cost providers because they were charged the same if they went to a high-cost provider and were not rewarded for choosing economically. Furthermore, it fostered hostility toward HMOs, since enrollees often found that their primary physician was not in the plan and felt coerced into accepting a different provider. As an alternative, Enthoven proposes the use of health care "exchanges," which he defines as "institutions where numerous employers and their employees can meet with numerous carriers and offer choices." This model offers the true managed competition of the Federal Employees Health Benefits Program (FEHBP), he writes, allowing employees to select from multiple carriers. New technologies could ease administration for employers, which in the past have been reluctant to offer a choice of health plans, and would allow employers to avoid pooling their risks with other employers. Properly risk-adjusted, Enthoven writes, the exchange would be able to "mitigate adverse selection so that competition is based on improving the delivery system, not selecting risks." Enthoven is the Marriner S. Eccles Professor of Public and Private Management...


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