ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, October 27, 1996 TAG: 9610280159
SECTION: NATIONAL/INTERNATIONAL PAGE: A-12 EDITION: METRO
DATELINE: MINNEAPOLIS
SOURCE: DAVID R. OLMOS LOS ANGELES TIMES
EMPLOYERS SAY the insurers waste money that could be spent on improving health care.
Not long ago, some of this city's most influential corporations embraced HMOs as a way to cut medical costs. Now the same companies are telling those health insurers to, in effect, get lost.
While conceding that they helped HMOs gain a dominance in Minnesota matched in few other states, these employers now complain that the creatures they helped invent have grown so big they are stifling competition and medical innovation.
And the corporations - including General Mills, Honeywell, Pillsbury, American Express and Dayton Hudson - have hit on a time-honored, potentially far-reaching solution: cutting out the middleman, aka the insurance industry.
In an effort that strikes at the heart of the managed-care industry, these employers in January will begin purchasing medical services for 400,000 people directly from organized groups of doctors, hospitals and clinics - leaving the insurance companies out in the cold.
The Minnesota experiment is perhaps the most important example of a backlash building across the country by employers, doctors and hospitals against insurers which, they contend, are gaining too much influence over medicine.
Their plan would swing the pendulum back toward the doctors and hospitals.
So all eyes are on the Minneapolis-St. Paul health care market.
Critics here complain that Minnesota's three biggest insurers have swallowed up smaller insurers and physician groups, snagging nearly 80 percent of Minnesotans enrolled in managed care, gaining worrisome control over pricing and steamrollering would-be competitors.
Moreover, Twin Cities employers complain that the big insurers are wasting millions of dollars to pay for billboards, prime-time TV commercials and other business expenses that would be better spent on health care.
``Doctors have been griping for years about being beat up by the health plans. Now they have an opportunity to see if they can deliver,'' said Fred Hamacher, a vice president at Minneapolis-based Dayton Hudson, whose nationwide retailing empire includes the Target and Mervyn's chains.
Then again, some health care experts question whether putting doctors back in charge is the answer. After all, they argue, it was physicians' spendthrift ways in the 1970s and 1980s that contributed to years of double-digit insurance premium increases, driving thousands of fed-up employers into the arms of HMOs.
Under the Minneapolis plan, about 15 groups of doctors, hospitals and clinics - including more than 90 percent of primary-care doctors and specialists in the Minneapolis-St. Paul area - will provide a standard benefits package and comparative information on cost, medical quality and customer service. Employees will get vouchers to purchase medical coverage from any one of the groups, whose services will vary in price.
The idea is to encourage people to shop for health care just as they would shop for a new computer or car - by comparing price, quality and service, says Steve Wetzell, executive director of the 24-member employer coalition, the Buyers' Health Care Action Group.
``At most U.S. companies, employers do most of the decision-making by choosing which health plans will be offered and what the cost to employees will be. With our program, employers will stop acting as workers' protectors, and consumers will have to think more responsibly,'' says Wetzell. ``We're relying on consumers to reform the market by acting as informed and rational purchasers.''
Proponents of the Minneapolis plan say mergers and price wars have created problems for employers and consumers. For example, cutthroat pricing by health plans has led many employers, particularly smaller ones, to switch HMOs in pursuit of better deals, disrupting doctor-patient relationships.
``Having employees change doctors is a very emotional situation,'' says Tom Pavey, benefits chief for American Express Co.'s financial advisers unit.
Others complain that the system tends to reward doctors and hospitals for cutting prices but little else.
LENGTH: Medium: 78 linesby CNB