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Discussion Paper

Informing Employed Consumers About Health Care Quality

Issues in Implementing the Research and Action Agenda

By Suzanne M. Paranjpe, Ph.D., Senior Vice President, Greater Detroit Area Health Council

Held December 11-12, 2000, New Directions for Research and Action was a conference designed to be a collaborative forum for discussing the challenges and opportunities of improving communication of information about health care quality to consumers. Discussions were to be based on the Research and Action Agenda, developed by the Work Group on Consumer Health Information.

Because that agenda does not address the problems of specific segments of the population, the Work Group commissioned a set of papers that focus on how issues relate to the information and health care needs of certain groups.

This discussion paper was distributed with the agenda in preparation for the conference in December 2000.


Employment-Based CoverageóWho is Covered, Who is Not?
Task I. Educate and Motivate Consumers to Use Quality Information
Task II. Improve the Supply and Delivery of Consumer-Oriented Quality Information
Task III. Develop Consumer-Oriented Measures
Task IV. Identify the Market Characteristics and the Purchasing Strategies that Support Consumer Use of Quality Information
Task V. Evaluate the Impact and Utility of Consumer Information Efforts


Todayís consumers are increasingly interested in a wide variety of health care topics, and health care tops the list of most frequently searched subject matters on the Internet. These topics can run the gamut from how to choose a health plan to choice of medical treatment. Regardless of the specific health-related topic, there is frequently a common threadóan interest in assessing health care quality.

Since 1995, around 65 percent of consumers with private health care insurance obtained coverage as part of their employment relationship.1 For the employed consumer, the plan sponsor often plays a key role in providing information on health care quality.

This paper will examine the history of providing information to consumers with employment-based health care coverage. It will also explore the challenges and future opportunities to provide this population expanded information on health care quality.

For purposes of this paper, consumers are defined as those individuals who participate in a health care plan offered through the workplace. Purchasers will be defined as those employers, union trust funds, or Federal, State, and local governments that provide health care coverage to these individuals as part of the employment relationship.

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Employment-Based CoverageóWho is Covered, Who is Not?

Since the late 1930s and 1940s, health care insurance through the workplace has been the major source of private health care insurance. Workplace coverage includes both employer-sponsored coverage as well as that provided by unions. In 1997, approximately 166 million persons, or 71.4 percent of the United States population age 65 and under, had private health care insurance.1 Of those with health insurance coverage, 65.1 percent obtained private health care insurance through the workplace. However, the percentage of workers with employment-based coverage has been declining. In 1984, 69 percent of consumers had employment-based coverage, but only 65 percent had such coverage in 1997.

Private insurance coverage through the workplace does not vary significantly by sex. Approximately 65.4 percent of men and 64.9 percent of women had employment-based coverage in 1997. However, the prevalence of private insurance does differ by race. As demonstrated in Table 1, the percent of non-whites with workplace private insurance has historically been less than that of whites.

Table 1. Private Insurance Obtained Through the Workplace by Race: Percent of the Population1

Characteristic 1984 1989 1994 1995 1996 1997
White 72.0 71.2 67.4 68.8 67.9 68.0
Black 53.3 53.6 50.2 51.8 53.0 53.7

Asian and Pacific Islander

64.4 60.2 57.8 60.2 59.4 60.5

Select for Text Version.

The prevalence of employment-based coverage for individuals of Hispanic origin also differs greatly from that of non-Hispanics. As shown in Table 2, in 1997, only 44.5 percent of all Hispanics had employment-based coverage, as compared with 71.4 percent of white non-Hispanics.

Table 2. Private Insurance Obtained Through the Workplace by Hispanic Origin and Race: Percent of the Population1

Characteristic 1984 1989 1994 1995 1996 1997
All Hispanic

52.9 48.6 45.1 44.9 44.6 44.5

White, non-Hispanic

74.0 74.0 70.7 72.3 71.5 71.4

Black, non-Hispanic

53.4 53.7 50.6 52.3 53.3 53.9

Select for Text Version.

The prevalence of private insurance obtained through the workplace is positively related to household income. In 1997, 82 percent of the population whose household income exceeded 200 percent of the poverty level obtained private insurance through the workplace. In contrast, only 19.6 and 36.8 percent of the population below 100 percent and 100-149 percent of the poverty level respectively obtained private insurance through the workplace. As shown in Table 3, there has been a steady decline since 1984 in the percent of the population, regardless of poverty level. However, the most striking declines have been for those below 200 percent of the poverty level. Since income and education are highly correlated, individuals with lower level of education are more likely not to have employment-based health care coverage.

Table 3. Private Insurance Obtained Through the Workplace By Age and Percent of the Poverty Level

All Ages 1984 1989 1994 1995 1996 1997

Below 100 percent

23.8 19.7 16.8 17.7 15.8 19.6

110-149 percent

51.1 45.0 40.6 41.7 40.4 36.8

150-199 percent

68.6 61.9 58.3 60.0 60.0 58.1

200 percent or more

85.0 83.9 82.7 83.4 83.0 82.0

Select for Text Version.

Finally, there are also regional variations in the employment-based health insurance coverage. The percent of the population with employment-based private insurance is the highest in the Midwest, which may be reflective of the strength of organized labor in the region. The Northeast follows the Midwest, with the lower levels of employment-based coverage in the South and the West. In all geographic regions, the percent of the population with employment has also declined markedly since 1984.

Table 4. Private Insurance Obtained Through the Workplace by Geographic Region1

Region 1984 1989 1994 1995 1996 1997
Northeast 74.1 75.1 70.0 70.1 69.2 69.7
Midwest 72.1 73.4 71.4 71.6 72.6 71.4
South 66.2 63.8 60.0 62.4 61.0 61.6
West 64.9 64.2 58.8 61.2 60.1 59.4

Select for Text Version.

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Task I. Educate and Motivate Consumers to Use Quality Information

Prior to examining how to motivate employed consumers to use health care information in decisionmaking, it is important to first explore the purchasersí decisionmaking process. In the model of employment-based health care coverage, the first level decisionmaker is the purchaser, with the consumer as a second-level decisionmaker. The purchaser must first make first determine whether or not to offer its workforce health care coverage. After making the decision to provide coverage, the purchaser will select the health plan(s) to offer to its workers. The purchaserís selection of health plans will be based on one or more of the following key criteria:

  • Is the cost of the health plan aligned with the purchaserís financial objectives?
  • Does the health plan provide the scope of benefits desired by the purchaser, subject to pre-defined financial constraints?
  • Will the health plan provide workers with the necessary geographic access to health care providers?
  • Will the planís customer service meet the needs of both the workers and the purchasers?
  • What is the "quality" (clinical) of the plan?

The relative importance of each of the above elements will vary by purchaser. Purchasers committed to value-based health care purchasing principles, a balancing of quality and cost, will strive to balance both elements. In other environments, cost considerations may dominate the purchaserís decisionmaking process.

Purchasers will also determine the number of plan choices that will be made available. As detailed in Table 5, purchasers with more than 500 employees are more likely to offer a choice of plans. Consumers in firms of less than 500 employees are more likely to have a single choice of a plan, which is typically a managed care offering.

Table 5. Health Plan Choices Offered to Employees-Private Firms2

  Fewer than 500 Employees 500 or More All
Employees offered a choice of plans 25% 59% 43%
Employees by Type of Plan Offered      
One type of managed care plan only 68% 39% 53%
Indemnity only 14% 12% 12%
Multiple managed care plans, no indemnity 11% 27% 20%
Managed care and indemnity plans 7% 22% 15%

Select for Text Version.

The consumer with employment-based health care coverage can thus make choices within the constraints established by the purchaser. For some consumers, typically those in firms with more that 500 workers, their first decision will be the selection of the health plan. Given that decision, or the absence of needing to make the decision because they are offered only one plan, the consumer must then select a provider. Both the choice of plan and provider will reflect the consumerís individual preferences and definition of quality.

What Quality Means to the Consumer

Consumers define quality differently than purchasers (or even researchers). A study for the Veterans Health Administration (VHA)3 examined consumersí definition of health care quality and the role that information played in their decisionmaking process with respect to hospital choice. Some key findings of the VHA study are that:

  • Consumersí perceptions of hospital quality are driven by service quality issues.
  • Consumers reactions to existing hospital quality report cards and their usefulness vary.
  • Consumers are unable to identify factors that would indicate that their treatment was appropriate.
  • Consumers are unaware of the factors that are important to prevent medical error.

Consumers also appear to have a different definition of "quality" when it comes to selecting a health plan than do purchasers, researchers, accrediting bodies, and others. Employed consumers often appear to have a basic two-step process for selecting a health plan that is void of quality measures. First, consumers look to see if their current physician(s) are in the networks of the plans being offered. Once they identify the plans in which their current physician(s) participate, they then frequently select the health plan that requires the lowest employee/member contribution.

The reliance of consumers on non-performance-based information is reinforced by the experience of purchasers. A number purchaser has provided information on health plan performance on quality metrics at the time of health plan selection. These purchasers found that, in spite of differences in the performance of the plans, consumers did not migrate to the health plans with the better performance on the quality measures. General Motors found, however, that their salaried employees did migrate to higher quality plans when there was a financial incentive (lower employee contribution) for the higher quality plan coupled with the health plan performance information.

If Not, Why Not?

Consumers do not appear to use available information on quality in their health care decisionmaking process. In order to motivate consumers to use performance information, the following key issues need to be considered:

  • Heighten awareness that quality matters.
  • Expand consumersí current definition of quality to include other key dimensions of quality.
  • Provide access to credible sources of information on quality.
  • Ensure consistency in the communication of the definition of quality and the reporting of associated metrics.
  • Provide consumers what they want to know, when they want to know it and in a user friendly format.

Quality Matters

In order to motivate consumers to use quality information, the case for quality must first be made. The consumer needs to understand that health care quality, at both the plan and provider level, does differ. Moreover, consumers must believe that the differences in quality can/will have an impact on their health if they are to truly be motivated to use the information.

The recent Institutes of Medicine (IOM) Report again brings forth evidence that there are serious quality problems throughout the health care industry. The IOM report notes the 90,000 people a year die as a result of preventable errors. While this number is several magnitudes larger than the number of deaths said to result from the Firestone tires on Ford Motor Companyís Explorer, the public reaction to the IOM Report pales in comparison to the reaction to the Firestone tire problem.

One possible explanation for this lack of public reaction to medical errors lies in one of the historical myths of health careóthe implicit belief that my doctor is "good." As noted by Epstein, "Öindividually, most of us believe our health care is really pretty good, and almost all of us think that our physician provides care that is a least average or better than average. (Garrison Keillor has us all laughing when he recounts tales of Lake Wobegon "where all the children are above average."4)

Major purchasers, concerned about medical error and patient safety, have joined together as the "Leapfrog" group.5 Members of Leapfrog include, but are not limited to:

  • General Motors.
  • GTE.
  • The Pacific Business Group on Health.
  • The Buyers Health Care Action.

The Health Care Financing Administration (HCFA) is also participating in Leapfrogís work. Leapfrog is focusing efforts on three areas of patient safety for which there is evidenced-based research that demonstrates that medical errors can be reduced. These areas, which focus on hospital-based care, are:

  • Adoption of volume-related hospital referrals for certain procedures (e.g., coronary artery bypass, angioplasty, esophageal cancer, etc.).
  • Staffing of intensive care units by intensivists (physicians specially trained in critical care medicine).
  • Implementation of computerized physician order entry systems for the ordering of prescription.

Leapfrog is currently seeking the involvement of other national purchasers who embrace patient safety. Further, Leapfrog has developed a set purchasing principles that participating purchasers will commit to use. Leapfrog members will also be educating their employees regarding patient safety and providing them with actionable steps to enhance patient safety.

Leapfrog Purchasing Principles

  • Rating and comparing major health care providers' safety efforts.
  • Informing and educating employees about patient safety and their health care choices.
  • Using substantial incentives to reward outstanding efforts to improve patient safety.
  • Focusing on discrete forward leaps in patient safety, highlighting a common set of delivery system improvements likely to yield the largest safety gains.
  • Holding health plans accountable for their role in reducing medical errors.
  • Enlisting the support of benefits consultants, brokers, and purchasing coalitions to promote patient safety.

Research is needed to better understand the publicís reaction to the IOM report as well as the impact of efforts of others, such as Leapfrog, to educate consumers about patient safety. Questions such as whether these reports/efforts have changed the publicís perception of health care, how to increase awareness of the issue, and how best to frame the issue could, and should, be explored.

Expanding the Definition of Quality

The disconnect between the consumersí perception of quality and truer measures of quality is perhaps one reason that current comparative health care information is not widely used. As evidenced by the VHA study discussed above, the consumer tends to focus on service, not clinical quality in making decisions relating to hospital care. Similarly, there is a significant difference in consumersí perception of a quality health plan. To the consumer, quality is often defined as to whether their current physican is in the plan and/or if the plan minimizes their out-of-pocket health care costs. Consumersí perception of quality needs to be broadened beyond service and cost considerations if they are to truly become "consumers" of health care. This will entail significant education by purchasers or other organizations to expand the consumersí perception of health care quality to include clinical performance measures.

Who Should/Can We Trust?

Consumers may view the health care information provided by purchasers with suspicion. For example, consumers may question the "selection" of the health plans being offered to them, given that the choices represent a subset of those available in the marketplace. Were the plan choices based on the purchaserís desire to control costs absent any consideration about quality? Or did the purchaser some select the plans based on both cost and quality? And if so, what was the relative weighting of the two measures? Similarly, purchaser-provided information on hospital quality may be viewed as suspect. Consumers may question whether the designation of high quality hospitals was more a function of lower costs for services rather than clinical performance.

Consumers may believe that purchasersí primary motivation in providing health care information is to move them to lower cost health plans or to lower cost providers. Consumers may thus place less credibility on the information because of its source. This would argue for non-purchasers, such as independent accrediting agencies, local coalitions, or other impartial entities, to serve as the "source" of credible, unbiased quality information for consumers.

Consistency Is King

As consumers are educated about quality, it is extremely important that they receive a consistent message. Consistency of the message is important on two levels:

  1. The definition of the components of quality.
  2. The actual performance of health plans and providers on quality metrics.

Consumers should not receive conflicting messages regarding what constitutes quality. For example, open access to services should not be depicted as being of higher quality than a managed environment that ensures appropriate access to services. Equally important is the consistency across various report cards of provider or health plan performance. If the various report cards show different ratings along the same or similar dimension of performance, the consumer will likely question the validity of the reports. The consumer may ultimately disregard all of the report in their decisionmaking process.

I Want It My Way

To be sucessful in motivating consumers to use information on quality in making health care decisions, the focus needs to be on information that is relevant and in a format that the consumer finds useful and is provided when the consumer wants the information.

The need to provide consumers information that they find relevant is critical. Focus group research of consumersí reactions to health plan report cards finds that the consumers often find the information overwhelming and not helpful in selecting a health plan.6 In research on consumersí reaction to hospital report cards, focus group participants stated that while they found the information was valuable, the definitions used did not appear to relate to health treatment.7 The focus participants also found that the hospital report card information was difficult to understand and hard to read.7

Reporting of health care information to employed consumers must recognize the differences in the types of information desired. Information on health promotion, obstetrical care, and pediatric care may be of great interest to families comprised of heads of households under age 40. The same information would likely be of little interests to households headed by consumers age 50 plus. For this group, information on chronic conditions, such a coronary heart disease, diabetes, and other such diseases would prove more relevant. While information should be tailored to the interests of the consumer, it must be founded in true measures of quality and not merely the consumersí perception of quality.

The timing of the provision of information to consumers is another important consideration. To date, the reporting of quality measures has been largely associated with purchasersí health plan open enrollment periods. As noted by Hibbard, et al, consumers find it difficult to anticipate their future health needs.8 Therefore, while an open enrollment report may highlight the better performing plans/providers for a disease such as diabetes, the non-diabetic consumer may disregard the information. Later in the year, however, after being diagnosed with diabetes, the consumer in all likelihood has forgotten that the availability of the information.

Consumers need access to quality measures throughout the year. One challenge will be educating consumers that this information is available so that they will seek it out when they need it. Since not all purchasers make such information available to their workforce, consideration of a community source of health care quality information is warranted.

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