From 1993 to 1997, the Pacific Business Group on Health, San Francisco, tested the predictive power and practical application of several risk-assessment tools used by large employers that offer their employees a choice of two or more health plans.
Information on competing health care plans is vital to employers. For example, if employers know whether one plan's enrollees are sicker and consequently use more services—they can accurately assess whether that plan is priced higher because sicker employees have selected it or because the plan is less efficient.
This project was part of the Robert Wood Johnson Foundation (RWJF) national program Changes in Health Care Financing and Organization (HCFO).
Using the risk assessment technique that relies solely on employee demographic information, the investigators found that neither the largest companies nor the lowest risk companies had the best prices.
They also determined that the addition of employee health status information improves the precision of risk assessment models.
Member companies used these results to collectively negotiate with 15 HMOs throughout California, requesting that each HMO submit a single bid for the whole group.
Through pooling their volume and risk, the companies achieved 1995 rates that were 5 to 10 percent lower than their 1994 rates.