The following case study is included here for two reasons. First, the diversity of employer activities in health benefit management makes orderly and comprehensive discussion of the topic difficult; the case study is a simplifying device. Second, the case study is intended to make more vivid the demands of responsibly managing an employment-based health benefit program. The case is also designed to illustrate the impact on individual employers and their employees of developments in the larger health care environment such as rising costs, debates about equity and risk sharing, and innovations in health plan design. Although many of the data are adapted from real organizations, the case itself cannot be read as a true or even average story, as an illustration of a perfect process, or as a process or outcome that the committee necessarily endorses. For an organization of the size depicted in the case study, the degree of internal analysis and employee involvement is probably atypical.

The organization has about 1500 nonunionized employees, about half professional and half administrative and clerical. Turnover is moderate. The average age of employees is about 40, and the organization has approximately 5 active employees for every retiree. Employees reside over a wide urban, suburban, and rural geographic area surrounding the organization's offices. The organization has a small clinic that provides some routine medical care, such as allergy shots.

The metropolitan area is plentifully supplied with primary care and specialist physicians, hospital beds, tertiary care services, and other health care providers. Several dozen insurers market coverage in the area, and most of the major ones have organized HMOs, PPOs, and other kinds of network health plans that compete with several locally created plans. The business community is not particularly active in health care issues, although there is a nascent purchasing coalition for small and medium-sized firms.

The state has the usual array of mandated benefits but no rate-setting commission, anti-managed-care laws, or state insurance pool for high-risk individuals. Health care providers complain about Medicare and Medicaid payment levels. Nevertheless, the reimbursement formulas for these government programs have left providers better off than their counterparts in many other areas and less likely to seek offsetting revenues from private purchasers of medical services.

As with most organizations, the health benefit program has evolved through a combination of marginal year-to-year adjustments punctuated by