Adverse selection among multiple competing health maintenance organizations.

This study examines risk selection among nine health plans competing for 16,182 employees of one large firm in 1989: one conventional fee-for-service plan, one group-model health maintenance organization (HMO), and seven network and independent practice model HMOs. We develop and compare measures of risk using weights based on HMO and fee-for-service expenditure data, respectively. We use a multiequation statistical model to develop two sets of utilization and expenditure weights for enrollees in each plan. One set of weights, based on discharge abstracts and outpatient records from the large group-model HMO, measures how much each of the nine groups of employees and dependents would have spent, had they been enrolled in a stringently managed plan with no consumer cost sharing. The other set of weights, based on fee-for-service claims data, measures how much each group would have spent, had it been enrolled in an unmanaged health plan with significant coinsurance and deductibles. Predicted annual expenditures per enrollee exhibit a 23% range from lowest (favorable selection) to highest (adverse selection) risk plans using the HMO weights and a 17% range using fee-for-service weights. The fee-for-service plan and group-model HMO with large enrollments have risk mixes near the center of the spectrum. Smaller HMOs exhibit the extreme forms of both favorable and adverse selection. The statistical methods adopted in this study can be used to risk-adjust capitation payments to competing health plans. As mergers among HMOs and group purchasing arrangements among employers increase the average enrollment in each plan from each payor, however, risk differences among plans will be attenuated and the need to risk-adjust payments will be less severe. Key words: health insurance; adverse selection; managed competition; health maintenance organization.

Trends in cesarean section use in California, 1983 to 1990.

OBJECTIVE: Our aim was to assess recent trends in cesarean section use in California. STUDY DESIGN: California discharge abstract data on hospital deliveries in 1983 through 1990 (379,759 to 587,508 annual deliveries) were used to analyze time trends by indication, age, race, and payment source. RESULTS: California cesarean section rates increased annually from 21.8% in 1983 to 25.0% in 1987 and then decreased to 22.7% by 1990. Similar patterns were noted for all age and race or ethnicity groups. Primary cesarean section rates increased from 15.2% in 1983 to 17.9% in 1987, then decreased to 16.2% by 1990. Declines in repeat cesarean section rates continued throughout 1983 through 1990, accelerating after 1987. For both primary and repeat cesarean section rates, time trends after mid-1987 were significantly different than those for 1983 to 1987. CONCLUSION: After increasing from 1983 to 1987, California cesarean section rates declined from 1988 to 1990. Existing payment source differences in cesarean section use increased in magnitude from 1983 to 1990, with privately insured women consistently having the highest cesarean section rates.

Health plan switching in anticipation of increased medical care utilization.

We compare rates and days of maternity and nonmaternity hospital admission for the years 1981 through 1984 for three groups of employees and dependents from a large private employer: those continuously enrolled in a fee-for-service (FFS) plan (N = 147,700), those continuously enrolled in a health maintenance organization (HMO) (N = 30,957), and those switching from the FFS plan to the HMO (N = 2,144). The rate of maternity admissions for plan switchers increased by 106% (P < 0.001) in the post-switch year compared with the pre-switch year, while maternity rates for continuing FFS-plan enrollees declined by 12% (P < 0.001) and rates for continuing HMO enrollees remained unchanged. Nonmaternity admission rates for switchers decreased by 19% (P = 0.079), consistent with the expectation that HMOs reduce these rates substantially, while rates for FFS-plan stayers increased 4% (P < 0.001) and those for HMO stayers remained unchanged. We conclude that employees often switch health plans when anticipating increased needs for maternity care and therefore that pre-switch rates of utilization are unreliable measures of the true magnitude of risk selection between HMOs and FFS plans.

A method for risk-adjusting employer contributions to competing health insurance plans.

Biased selection can threaten the viability of multiple choice health systems unless payments to particular plans are adjusted to offset risk differences among employees. We report the results of a study designed to predict medical care utilization and expenditures for groups of fee-for-service plan (FFS) and health maintenance organization (HMO) enrollees, using characteristics commonly available in the personnel files of large employers. Simulation analyses indicate that the six-equation, maximum likelihood model predicts well for groups of 1,000 or more. Additional data are required to reduce prediction errors for smaller groups. This new methodology potentially allows risk-rating of employer contributions to competing health plans, based on the expected utilization of the individuals choosing each plan.

Services and charges by PPO physicians for PPO and indemnity patients. An episode of care comparison.

Physicians who participate in preferred provider organizations (PPOs) usually agree to various types of utilization review and sometimes discount their charges or agree to accept lower fees. This study was performed to determine whether they provided more or fewer services to their PPO patients than to their indemnity patients and whether the discounting resulted in lower expenditures for each episode of illness. In 1984, Metropolitan Life offered PPO coverage to Dade County (Florida) school board employees and dependents but only a standard indemnity plan to Dade County government employees and dependents. Episodes of care were examined for patients with chest pain, hypertension, joint pain, gastrointestinal or liver disorders, and lower back pain cared for by physicians who treated patients in both the PPO and indemnity employee groups. For PPO patients, charges per physician service were the same or lower, but total physician charges during an episode were higher. For services such as laboratory tests, diagnostic x-rays, and room and board, PPO and indemnity patients' charges were not significantly different.