14 Compensation and Working Conditions Spring 1999

ALLAN P. BLOSTIN

IRIS S. DIAZ

Health Insurance

Provisions Captured

by the EBS and the NCS

The Employee Benefits Survey monitored developments

and captured relevant health insurance data in the employee benefits arena since its inception in 1979. This

process continues as the Employee Benefits Survey

becomes part of the National Compensation Survey.

Allan P. Blostin and Iris S. Díaz are economists in

the Division of Compensation Data Analysis and

Planning, Bureau of Labor Statistics.

Telephone: (202) 606-6240

E-mail: Blostin_A@bls.gov

 Diaz_I@bls.gov

Ensuring the reliability of health

data and capturing the rapidly

changing circumstances surrounding health care benefits requires

the Bureau of Labor Statistics (BLS)

to eliminate, revise, and expand the

details of plan provisions that are surveyed.1 This article explores how the

Employee Benefits Survey (EBS) has

evolved into its present form in terms

of its ability to provide useful data on

the details of health insurance plans.

It also explains why the health portion of the survey has undergone

myriad changes since its inception in

1979, and what changes are envisioned for the future as the EBS is incorporated into the National Compensation Survey (NCS).2

Health insurance provisions surveyed by the EBS

Since 1979, the specific health insurance provisions captured by the EBS

have changed. Surveyed provisions

have been expanded to reflect emerging trends and streamlined to eliminate superfluous details, those not

readily available from plan documents

or those too uncommon to support

published estimates.

Expansions due to changing plan

provisions. During the 1980s, the cost

of medical care grew rapidly. The

Consumer Price Index registered a

119-percent increase in the price of all

medical care between 1979 and 1989.3

All medical items grew sharply—hospitalization at the highest rate, 162

percent or 2.5 times the general rate

of inflation.

Many insurers began to offer managed care provisions within plans

other than health maintenance organizations (HMOs) to help contain

these rising costs.4 (See appendix 1

for definitions of health insurance

terms used in this article.) By their

nature, HMOs have their own built-in

forms of managed care provisions. In

1985, the EBS began surveying various managed care features contained

within these plans, such as incentives

This is the third of a series of three related articles that appear in this issue

of Compensation and Working Conditions. Together, they trace the Bureau’s

Employee Benefits Survey from its inception and explain how it will become

part of the Bureau’s National Compensation Survey.
 Compensation and Working Conditions Spring 1999 15

Health Insurance Provisions

for preadmission hospital testing and

lower reimbursement for nonemergency weekend admissions. In 1986,

the EBS began surveying provisions

for preadmission certification requirements. As managed care provisions

became increasingly prominent, the

EBS surveyed the specific details of

each feature (for example, penalties for

failing to undergo preadmission certification). However, published estimates included only the penalties for

preadmission certification—the most

common of the health care cost containment features captured by the survey.

In 1992 and 1993, the EBS expanded surveyed plan provisions for

managed care plans. It published estimates that compare preferred provider organization (PPO) and traditional fee-for-service (FFS) plans for

coverages such as coinsurance rates.

In addition, the EBS expanded the

details it captured for HMOs to include

data on selected features such as pointof-service options and Federal qualification. In 1993, estimates were published separately for HMOs and

non-HMOs for all categories of medical care5 and prescription drugs collected.

Contractions to facilitate streamlining. Over the years, the Bureau eliminated some surveyed provisions because the data were duplicative, hard

to obtain, not prevalent, of little interest to the benefits community, or because they followed the same pattern

year after year. For example, during

the early years, the Bureau eliminated

plan provision details for types of hospital coverage, such as emergency care

and intensive care, because they mirrored coverage for other hospital services. In addition, it eliminated coverage details for dependents because

coverage rarely varied for dependents.

The Bureau also had other reasons

for eliminating plan provisions or provision details. In 1993, for example,

the EBS began using a new data capture system. During the development

of this system, BLS eliminated previously captured details that lacked identifiable users or purpose. The development of the new data capture system afforded the Bureau an opportunity to streamline the survey without

decreasing the number of published estimates.

Comparison of health insurance

provisions between the EBS and

the NCS

The transition from the EBS to the

NCS has engendered extensive research. Through this research, BLS

identified the effectiveness of current

health insurance details, the changes

needed for the production of more

timely and relevant estimates, and the

final design of the NCS. (See appendix 2.)

The Bureau’s mandate is to provide

users with the most relevant data

within program limitations. The Bureau has traditionally maintained communications with the benefits community. With the advent of the NCS, BLS

conducted a coordinated outreach effort to identify the needs and concerns

of the data users. To ensure adequate

input, the Bureau contacted users from

different disciplines, such as academia,

government, insurance companies,

unions, research organizations, and

the print media. In the health area,

users were asked to explain their needs

for information on “basic” medical

provisions,6 alternatives to hospital

care,7 dental care, vision care, prescription drugs, mental health care and

substance abuse treatment provisions,

major medical limits, and managed

care plans and provisions.

The research demonstrated that the

data users are generally comfortable

with the amount of detail the survey

publishes. However, among the very

broad EBS user community, some

would like to see expanded details

published on alternatives to hospital

care, mental health care and substance

abuse treatment provisions, prescription drugs, and vision care. Others

would like published incidence estimates of establishments offering benefits and additional breakouts by establishment size, industry, occupation,

and geographic area.

The NCS will streamline plan provisions and publish more breakouts of

the data. For example, it will publish

estimates of plan incidence by “key”

plan attributes and also by industry,

occupation, and region. In addition,

published estimates of the incidence

of employee benefits will be for the entire civilian nonfarm, non-Federal

workforce every year. The NCS will

also publish annual benefits incidence

data for all private establishments and

State and local governments from a

sample of establishments that is approximately 70 percent larger than the

EBS sample. In addition, the NCS will

provide breakouts of data centered on

types of health plans. The survey will

also reflect the Bureau’s internal process needs. For example, the EBS captured and published estimates for dental care fee arrangements. Users have

shown little interest in dental care fee

arrangements and as the tabulation

below shows, since 1989, the vast

majority of participants are in traditional fee-for-service plans. Therefore,

the Bureau considered eliminating

dental care fee arrangements, but it

was determined that the NCS will capture these data solely to impute missing data.

Eliminated details. Under the NCS,

the provisions for hospital room and

board will be cut back considerably.

The actual dollar and day amounts

used as limits in some plans will be

eliminated because these provisions

have become less prevalent over the

last decade. Since 1988, there has

Dental care fee arrangement Percent

 Total with dental care ................... 100 100 100 100 100

Traditional fee-for-service ................... 91 91 87 85 81

Preferred provider organization .......... 4 3 6 6 11

Health maintenance organization ....... 56788

1989 1991 1993 1995 1997
16 Compensation and Working Conditions Spring 1999

been a marked increase in the proportion of participants in non-HMOs with

hospital room and board coverage subject only to major medical limits.

These plans have no other limitations

in addition to major medical

deductibles, coinsurance requirements,

and lifetime dollar maximums. The

following tabulation shows the percent

of non-HMO participants covered by

these hospital room and board arrangements from 1988 through 1997.

Year Percent

1988 .................................. 47

1989 .................................. 51

1991 .................................. 55

1993 .................................. 58

1995 .................................. 69

1997 .................................. 68

The NCS will not capture data on

second surgical opinions, which is a

cost containment measure designed to

prevent unnecessary surgical procedures. Second surgical opinions are

becoming less relevant in medical care

plans because (1) coverage for participants in non-HMOs declined from 75

percent in 1993 to 53 percent in 1995,

and (2) surgeries are generally performed despite second or even third

opinions. Usually, second surgical

opinion provisions only require patients to get the second opinion, not to

accept it.8 Moreover, the second surgical opinion, as a cost containment

feature, has never been of particular

interest to EBS users. Their interest

in cost containment features has generally focused on preadmission certification and utilization review.

Expanded details. The NCS, while

maintaining current details for skilled

nursing facilities, expanded the details

that will be captured for alternatives

to hospital care (hospice and home

health care) by capturing separate coinsurance rates for each service and

separate dollar amount limits for hospice care. In addition, the NCS also

expanded details for orthodontia procedures, which frequently have lifetime dollar limits for employees that

are different from the comparable limits for employee dependents.

Finally, the survey expanded the

types of medical care fee arrangements

captured. The EBS historically published details for three major types of

fee arrangements: FFS, PPO, and

HMO. In recent years, these classifications have not always corresponded

to the fee arrangements described in

plan documents. It has become more

difficult to assign correct fee arrangements using only these three classifications. Therefore, the NCS will capture data for an expanded group of

medical care fee arrangements. It will

keep the traditional FFS, PPO, and

HMO classifications and, in addition,

will expand published details for traditional HMOs and HMOs that have

point-of-service features. In traditional HMOs, participants must use a

service provider within the HMO network to receive any benefits. In HMOs

with point-of-service features, enrollees may go outside the network to receive services. However, the services

are more costly—enrollees are subject

to deductible amounts and coinsurance

requirements—than the services provided within the network.

Summary

Historically, the EBS has monitored

developments in the health insurance

industry to capture relevant data and

reflect emerging trends. Although the

general thrust will be to slightly reduce the amount of detail captured by

the EBS, some expansion will occur

in the NCS. This expansion will improve the usability of the data published without adversely effecting the

major published estimates. The

streamlined set of surveyed provision

details will allow for more timely publications and increase the resources to

pursue ad hoc surveys on topical issues.

1

 For more information, see Allan P. Blostin,

John J. Kane, and Jordan N. Pfuntner, “Changing

Survey Strategies in the Evolution of Health Care

Plans,” Compensation and Working Conditions,

September 1996, pp. 3-10. 2

 For more information about producing benefit incidence and provision estimates in the NCS,

see Allan P. Blostin, “An Overview of the Employee Benefits and the National Compensation

Surveys” in this issue of Compensation and Working Conditions, pp.2-5. 3

 For more information, see U.S. Department

of Labor, Bureau of Labor Statistics, Consumer

Price Index for All Urban Consumers Historical Tables. 4

 For a discussion of changes in the health

industry, see Source Book of Health Insurance

Data, 1996, by Health Insurance Association of

America, 1997. Also, see The Handbook of Employee Benefits: Design, Funding and Administration, 3rd Edition, 1992, ed., Jerry S.

Rosenbloom. 5

 Medical care excludes estimates for dental

care, vision care, and prescription drugs.

6

 Basic medical provisions are hospital room

and board, inpatient physicians’ visits, office visits, surgery, and diagnostic x-ray and laboratory

tests.7

 Alternatives to hospital care provide medical care coverage in less expensive settings. These

alternatives include skilled nursing facilities, home

health care, and hospice care. 8

 For a discussion on second surgical opinions see The Handbook of Employee Benefits:

Design, Funding and Administration, pp. 229-

230 and 273-276.
 Compensation and Working Conditions Spring 1999 17

Health Insurance Provisions

Coinsurance: The percentage of a participant’s medical

expenses covered by the plan and by the participant.

Most plans pay a rate of 80 percent, with the participant

paying the remaining 20 percent.

Deductible: Amount of expenses participants are required

to pay prior to receiving benefit coverage. Deductibles are

usually on an annual basis; they are commonly $100,

$150, and $200.

Fee arrangement: Type of plan (for example, FFS, PPO,

and HMO) that delivers care.

Fee-for-service plan: See traditional fee-for-service plan.

Health maintenance organization (HMO): Type of plan

that provides a prescribed set of benefits to the participant

for a prepaid fee. Enrollees are limited to specific care

providers, and most services are paid in full. HMOs are

responsible for both delivering the care and bearing the

associated financial risk.

Lifetime dollar maximum: The maximum amount

payable for covered expenses for the insured and each

covered dependent while under the medical plan. Most

plans have a lifetime maximum of $1 million per individual.

Major medical: Means of covering a wide range of

services and providing protection for catastrophic illness

or injury. Participant is generally required to pay an

annual deductible or a coinsurance before benefits are

paid out.

Managed care plan: Type of plan that is an alternative to

or replacement for traditional indemnity insurance—

health maintenance organization and preferred provider

organization. These plans arrange with selected health

care providers to furnish a comprehensive set of services

and to implement cost containment and quality measures.

Managed care provisions: Features within non-HMOs

that provide the insurers cost containment and quality

measures. These include preadmission certification,

concurrent review, and utilization review.

Point-of-service: Type of health maintenance organization plan that allows enrollees to receive services outside

the network at a higher cost.

Preadmission certification: A requirement that the

participant notify the insurer of the necessity and appropriateness of non-emergency hospitalization, prior to

admission. If precertification is not obtained, a penalty

typically applies.

Preadmission testing: A requirement designed to

encourage patients to obtain necessary diagnostic services

on an outpatient basis prior to non-emergency hospitalization. The testing is designed to reduce the length of

hospital stay.

Preferred provider organization (PPO): Type of feefor-service plan where coverage is provided to participants through a network of selected health care providers

(such as hospitals and doctors). The enrollees may go

outside of the network of providers, but they would pay a

greater percentage of the cost of coverage.

Provisions: Services and benefits received by the plan

participant, or limits and restrictions to these services and

benefits.

Traditional fee-for-service plan (FFS): Type of plan

that allows the participant to select any provider for care.

These plans reimburse the patient or provider or both as

expenses are incurred.

Utilization review: The process of reviewing the appropriateness and quality of care provided to patients. It

may occur before, at the same time, or after the services

are rendered.

APPENDIX 1. Health insurance terms
18 Compensation and Working Conditions Spring 1999

APPENDIX 2. Health plan provisions and provision details in the NCS

Plan provision Provision details

Dental ........................................... Coverage limitations for dental treatments such as exams, fillings, crowns,

 and orthodontia; and plan deductible and maximum

Fee arrangement ........................... Type of arrangements: fee-for-service, preferred provider organization,

 exclusive provider organization, traditional HMO, and point-of-service

 HMO

Financial intermediaries .............. Type of intermediaries: self-insured, commercial insurance,

 Blue Cross/Blue Shield, and independent organizations

HMO characteristics..................... Type of HMO and Federal qualification status

Home health care.......................... Coinsurance limitations

Hospice care ................................. Dollar and coinsurance limitations

Hospital room and board .............. Coverage limitations such as deductibles, day restrictions, coinsurance,

 and dollar maximums

Inpatient surgery .......................... Dollar and coinsurance limitations

Major medical limitations ............ Coinsurance, deductible, out-of-pocket maximum, and plan maximum

 coverage

Managed care provisions ............. Preadmission certification and utilization or concurrent review

Mental health care and

substance abuse treatment ............ Inpatient and outpatient mental health, alcohol, and drug abuse

Office visits ................................... Deductible, dollar, and coinsurance limitations

Other benefits ............................... Standard benefits such as immunizations, physical examinations (surveyed

 annually), additional services such as chiropractic and podiatry benefits

 (surveyed in a flexible cycle or as needed)

Outpatient surgery ........................ Deductible, dollar, and coinsurance limitations

Plan sponsor ................................. Type of sponsors: private, State and local governments, multi-employer,

 and employer associations

Prescription drugs ........................ Brand name prescription drugs, generics, and mail order drugs

Skilled nursing facilities .............. Days and coinsurance limitations

Vision............................................ Eye exams, eyeglasses, and contact lenses