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NEW YORK – A report from Moody's Investors Service indicates changes in employee benefits plan designs as well as new medical management techniques such as employee wellness programs are reducing demand for healthcare services.
"A number of temporary and cyclical factors contributed to a decreased use of healthcare services during 2010. Foremost among these is stubbornly high unemployment stemming from a weak economy that is undergoing a slow recovery," the report noted.
That these factors contributed to reduced demand for healthcare services is not surprising, said the report's authors. However, demand for healthcare had dropped even more than they anticipated due to strictly economic factors.
"As the economy strengthens, those temporary and more cyclical factors will improve," said Diana Lee, vice president and senior credit officer with Moody's and the report's lead author. "But we think employers and insurers, through the efforts they have been making – even as the economy recovers – will continue to play a role in constraining demand."
These efforts include shifting medical costs to employees through insurance plans with higher deductibles and co-pays, a growing use of high deductible plans using health savings accounts, and discouraging employees from using high-cost less effective medical treatments.
While an improving economy should boost healthcare demand as more people regain insurance coverage, "we believe a more permanent cultural shift is under way that's likely to keep pressure on healthcare demand and growth rates," the report authors noted. "Rising healthcare costs have forced employers to redesign health insurance benefits, and typically these changes have resulted in lower coverage levels and increased shifting of costs to employees."
Steve Zaharuk, vice president and insurance analyst with Moody's, said these changes will only intensify pressure on demand in the coming years as many benefit design changes are only now gaining traction.
"The insurance sector has been advocating for a number of years changes to the health insurance system to try to curb demand," he said. "They have been doing it on the provider side, but haven't been able to do it on the consumer side without the help of the employer. Employers have mostly wanted hands off and didn't want to get involved in their employees' healthcare, but that has changed."
Also playing a role in the decreased demand is the growing use of health savings accounts and high-deductible insurance – so-called consumer directed health plans.
According to information from the Employee Benefits Research Institute, 5.7 million people in the United States are using HSAs, and the total value of these accounts continues to grow, reaching more than $7.7 billion in 2010.
"Individuals in CDHPs were more likely than those with traditional coverage to exhibit a number of cost-conscious behaviors, such as having checked whether their plan would cover care; asked for a generic drug instead of a brand name; talked to their doctor about prescription drug options and costs; talked to their doctor about other treatment options and costs; asked their doctor to recommend a less costly prescription drug; developed a budget to manage health care expenses; and checked prices before getting care," the report stated.
While many of the changes are being driven by employers and private health insurance companies, the Moody's team expects public payers to also influence healthcare consumption in the coming years.
"The private insurers are more on the front end of looking at these things, but we think it will become a bigger focus in the coming years with other payers as well," Lee noted.