Center for Studying Health System Change

PUBLIC POLICY

Subsequent to the passage of federal Medicaid legislation in 1965, Arizona was the only state that did not develop a traditional Medicaid program. In 1982, stimulated by the pending bankruptcy of several rural county governments, the state instituted a demonstration program that enrolled low-income residents in prepaid health plans selected by the state through a competitive bidding process. This alternative to Medicaid, called the Arizona Health Care Cost Containment System (AHCCCS), continues today and is viewed nationally and locally as successful. In fact, a recent ballot initiative to expand eligibility for AHCCCS was supported by 75 percent of Arizona voters. AHCCCS has played an important role in shaping Phoenix’s health care system during the past 15 years, particularly the county-based system of care for the indigent. However, there is now considerable concern about the potential impact of federal welfare reform on AHCCCS and on the availability of health and social services for immigrants in Phoenix who do not quality for AHCCCS.

Except for those issues related to the financing and provision of health care for low-income individuals, relatively little public policy attention in Arizona has been devoted to health care. Last year, the legislature considered a "patient protection act" to govern HMO grievance procedures. Health plans opposed the initiative, claiming it would increase their costs, and a task force was appointed to negotiate a compromise measure. To date, Arizona has passed no "anti-managed care" legislation.

The state attorney general’s office became concerned with the issue of for-profit conversion when Samaritan Health System considered an acquisition proposal by Columbia/ HCA. But the acquisition did not materialize, obviating the need for specific policy actions.

PURCHASING

Phoenix has enjoyed a prosperous economy during the past few years. Unemployment is approximately 5 percent, and during 1994 and 1995, Phoenix led the country in job creation among communities with more than 750,000 residents.⁷ A substantial proportion of those new jobs were in the service sector. More than half of the area’s employees work for companies with 200 or fewer employees. The largest private sector employers in Phoenix include Honeywell, Allied Signal, Motorola, America West Airlines and the local health care systems.⁸

Many large, non-health care, private sector employers are based outside the Phoenix area, and their health care purchasing decisions are strongly influenced by the policies of their corporate parents. Most of these employers contract with large, national health insurers, such as Cigna, Aetna, Foundation Health Plans and FHP. Managed care plans have been included in their health care offerings to employees for some time. These large employers typically pay 90 to 100 percent of their employees’ health insurance premiums, and a smaller percentage for dependents. Some of these employers now expect contracting plans to be accredited by the National Committee for Quality Assurance and to collect and report performance data for the Health Plan Employer Data and Information Set (HEDIS). These employers also collect information on their employees’ satisfaction with various dimensions of health plan performance. Large employers believe that their employees value provider choice and, as a result, health plans that offer broad provider networks and easy access to physicians are becoming more popular.

The Arizona State Retirement System, which includes all of the state’s current employees and its retirees, is the largest public sector employer in Phoenix. It started using a competitive bidding process for its health benefits program in 1992, in response to a steep rate increase. The state makes a level premium contribution that is determined by the lowest-cost plan. Employees who choose a more expensive option must pay the additional premium cost themselves.

Small businesses rely heavily on brokers to secure health insurance coverage. Price is the most important factor in their selection decisions, and they typically pay a much smaller proportion of the health insurance premium than do larger employers. However, choice and access to physicians are important to these purchasers as well.

As employers, Phoenix’s health care systems play a major role in the area’s economy. Most systems have adopted strategies to encourage their employees to seek health care from system providers. For example, Samaritan’s employees represent a large source of enrollment for HealthPartner’s Health Plan, which is partly owned by Samaritan.

There is little cooperative activity among Phoenix employers with respect to evaluating or purchasing health care. The Coalition for Affordable Health Care, which served as an educational and communication forum for employers, engaged in no joint purchasing decisions; in fact, it dissolved in late 1996. The only ongoing joint purchasing activity identified by respondents involves a group of grocers who are collaborating on the purchase of mental health benefits.