Banks Finding Ways to Control Employee Health Care Costs

Banks are on the hot seat to manage expenses better. As a result, they are looking for -- and finding -- ways to stem the runaway costs of health plans while ensuring quality care for their employees.

"With annual medical-plan costs increasing at 21% a year, it's no surprise that bankers are more concerned with health care costs," said Bob Williams, a benefits consultant with Wyatt Co., Washington.

Among the various plans banks are adopting are these:

* Managed plans, which pair employees with a doctor who arranges all medical care, including hospital visits and specialty care, through a network of physicians who have agreed to controlled prices for treatment.

* Preventive care, which -- in the hopes of heading off worse, more expensive problems later -- helps employees treat obesity, stress, cholesterol, or high blood pressure and to stop smoking.

* Prescription drug programs, which get employees the prescriptions they need at reduced cost.

* Self-funding of insurance, which eliminates the need to pay an insurance company for administration and overhead. Instead, bankers write the annual premium check to themselves, keep it in a separate, interest-bearing account that the bank retains control over, then pay the bills themselves when employees file claims.

* Increased employee contributions, which shift the cost burden from employer to employee by raising employee premiums and copayments and by setting a higher deductible.

* The right to approve hospital care before the employee goes in for treatment.

* Mandatory second opinions, which ensure that surgery is necessary.

* The right to withhold reimbursement for any medical procedure arising from an already existing problem.

Banks Outdo Other Companies

Of all of these programs, bankers are most likely to use a managed care plan. A 1990 Wyatt Co. survey found that 88% of all bank holding companies use managed care.

"That's much better than the total for all industries, where the percentage using managed health care is only 73%," said Dr. Roger Taylor, Wyatt's national leader of health care consulting.

Pittsburgh-based Mellon Bank is switching to a managed-care plan in 1992. The big reason is cost savings. Today, Mellon's contribution -- the cost per month per employee for family coverage -- is $205. With the switch to managed care, that cost is expected to rise to $416 by 2001. If Mellon were to stick with its current plan, its projected cost would be $645 for each employee by 2001.

Mellon, like many other banks, takes the initiative in heading off potential health care expenditures. To encourage healthful behavior, the bank offers to test employees and their spouses to determine problems with obesity, smoking, cholesterol, or high blood pressure.

"The best payoff thus far has been consciousness-raising," said D. Michael Roark, executive vice president of human resources.

The hope, according to Mr. Roark, is that employee awareness and action now will reduce the toll -- and costs -- of heart attacks and cancer later on.

Yet another way that Mellon is controlling health care expenses is through its mail-order prescription drug program for maintenance-type drugs such as insulin for diabetics. With the mail-order prescription plan, the employee telephones a doctor, who then orders a 90-day supply of the drug to be delivered to the patient's home.

According to Mr. Roark, the plan has three clear cost-saving benefits:

* Brand-name drugs cost 30% to 60% less than if they were bought from a corner drugstore, since high volume rates are negotiated with drug suppliers.

* Generic drugs, which cost about half the price of brand name drugs, are specified more often.

* People who need medication are more likely to take it. What's the cost savings there? "If a high cholesterol patient takes the cholesterol medication and avoids open heart surgery, you've saved money," answered Mr. Roark.

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