Why don't employers collaborate on health benefits?

Among the things that would be easier to do in health reform than many other things would be to foster or force collaboration among employers. For years, large employers have crafted their own benefit plans for their companies. These plans can be very different from each other employer to employer. In addition, their administrative practices differ from each other as well, with some requiring lots of managed care oversight while others don't. Some cover transplants, others don't. One will cover preventive care, another won't. And so it goes. Formularies for prescription drugs vary all over the map.


All of this has the effect of driving up costs in the provider world. Providers of all stripes put in place massive systems and hire millions of people across the country to deal with all of this variation--from how to check for eligibility to which procedures are covered or how much a patient will be asked to pay for a hospital stay. For the most part, most of this is driven by some sense among employers or their consultants that crafting a specific solution for the company adds value to the company's bottom line or makes it more competitive in the market place.

My sense is that this is overblown. Few people go to work for companies strictly because of the health benefit plan specifics. In fact, if someone is joining a company for the health benefits, it is because they probably need them. So in some ways, large employers may actually be doing themselves harm by attracting sicker than average employees. I don't know that this is the case, but what I am saying is that the benefit plan in its details isn't of that much interest to employees. The fact that the employer offers benefits is more important as is the cost of the coverage along with deductibles and other cost sharing elements.

Wouldn't it make more sense for employers, who continually complain about the high cost of health care (with good reason) to collaborate and adopt one benefit plan or, failing that, two or three, with all of them covering exactly the same things, containing the same drug formularies, having the same managed care components and so on. In this way, providers would become very familiar with these plans and reduce their billing and other administrative costs. Why? Because so many staff in provider organizations are there just to deal with the variations and exceptions. Reduce the variation and staff can be reduced.

But there are other benefits as well for employer and employee. Workers going from company to company, at least among those who are in the collaborative, would know what their benefits will be. They wouldn't have to worry about the drug they take falling off the formulary, forcing them to pay more and find another medication. Employers could actually compare costs with each other because the confounding factor of differing benefit plans would end. In fact, employers would save more dollars because they could combine their analytical infrastructure and compare costs and outcomes with each other.

Communities would benefit because employers would be working together to improve diabetic care across all of their populations at once. They could all adopt common practices to deal with obesity and smoking cessation, combining their efforts collectively with public health programs. Ditto for wellness.

Short of national health care, there are things like this that we could do today. Employers should begin to adopt common benefit plans, payment policies, network standards, etc. In this way, we could begin to reduce variation, reduce costs and improve outcomes. Why large employers particularly haven't done this is curious.