Physicians. While many of the rural physicians interviewed in North Carolina would prefer not to deal with HMOs at all, they are generally positive about their relationships with United HealthCare of North Carolina. These physicians chose to contract with the HMO to obtain new patients and to retain existing patients. They are satisfied that their participation has accomplished these goals. Their reimbursement arrangements are easy to understand, and most view the payment amounts as satisfactory. The physicians regard the size of the HMO's provider network and the open-access structure of the HMO as positive features that allow them to make referrals without the restrictions imposed by some other HMOs. To date, participation in United HealthCare of North Carolina has imposed few burdens on rural physicians. They are reimbursed on a fee-for-service basis, and their financial risk has been limited. They do not perceive that the HMO has had a significant impact on the way they practice medicine. This situation may change in the future if enrollees from United HealthCare of North Carolina and other HMOs constitute a greater proportion of their practices and if these HMOs move toward capitated reimbursement. The attitudes of rural physicians toward United HealthCare of North Carolina also may change if the HMO attempts to more actively manage the care provided to its enrollees. United HealthCare of North Carolina plans to eliminate physician risk sharing (in the form of withholds) and replace it with bonus payments. As one HMO executive said, the plan wants to 'put incentives where they belong.' If rewarding good performance instead of punishing poor performance yields intended consequences, it may provide United HealthCare of North Carolina with a competitive advantage in rural areas. First, because such a change offers an opportunity to augment a physician's income instead of diminishing it, physicians might prefer to contract with the HMO rather than with other HMOs. Second, because bonus payments depend on performance, United HealthCare of North Carolina providers may produce outcomes that allow reductions in premium prices or expansions of benefits compared with the HMO's competitors. Hospitals. Rural hospitals cited similar motivations (attracting and retaining business) for participating in United HealthCare of North Carolina and similar levels of satisfaction with their relationships. In their experiences, the HMO has been fair in its negotiations and reimbursement. Although they contract with multiple HMOs, these rural hospitals do not perceive that HMO participation has had a significant impact on hospital operations. Because these hospitals, like many rural hospitals, rely heavily on Medicare (and, to a lesser degree, on Medicaid) as revenue sources, the future impact of managed care on their operations will depend in large part on the extent to which significant proportions of their Medicare and Medicaid patients enroll in HMOs. Employers. Until recently, employers in rural areas of North Carolina who wished to purchase health insurance on behalf of their employees were limited to choosing coverage from available indemnity insurers. Some employers, particularly local affiliates of national firms, wanted to offer their employees a choice of health insurance benefits, including PPOs and HMOs. United HealthCare of North Carolina responded to rural employer demand by adopting a marketing plan that explicitly recognized the deficiencies of the rural health insurance market. United HealthCare of North Carolina decided to compete with indemnity insurers in rural areas of the state, targeting small employers. The marketing strategy has been successful; the HMO's provider panel is sufficiently broad so employees who enroll in the plan do not have to change physicians, and the premium price of the HMO, in most cases, is below the premium price of indemnity insurance. Thus, employers can reduce their benefit costs while offering their employees more comprehensive health insurance benefits. The regionalization of United HealthCare of North Carolina supports the rural marketing plan. Employers indicate that regional HMO staff are available to solve problems and are responsive to the needs of employers and employees. Although the HMO is a statewide organization owned by a national firm, decentralization of customer and provider relations to regional offices has given the HMO a 'local face.' Another element of the rural strategy is the local insurance agent who increasingly sells United HealthCare of North Carolina products to rural employers. Many small employers have long-standing relationships with local insurance brokers who play a variety of roles for them, including agent, consultant and administrator. These employers rely on the advice of their insurance agents. Selling through community insurance agents helps promote the HMO's local flavor. Although it concentrates on the small employer market, United HealthCare of North Carolina also sells to larger employers in rural areas who are affiliates of national firms. Unlike smaller employers, these employers require no managed care education. Sophisticated purchasers of health care benefits, they actively seek out managed care vendors. These firms typically accept proposals locally but evaluate them nationally, frequently using the expertise of managed care consultants. For such employers, the choice is not between United HealthCare of North Carolina and an indemnity plan but between it and another HMO. To date, United HealthCare of North Carolina has had an advantage over other HMOs in rural areas by virtue of the size of its provider network. As the HMO market in North Carolina matures and competition among HMOs increases, this advantage is likely to diminish. Employees. The rural employees covered by United HealthCare of North Carolina are generally satisfied with their coverage. The HMO's large provider network means that they do not have to change doctors when they enroll in the plan. The open access feature of the plan eliminates the need for employees to obtain referral authorization before seeking care from a specialist. Employees also enjoy first-dollar coverage on a number of preventive services, some of which were not covered by previous indemnity plans. Employee dissatisfaction with the HMO focuses primarily on aspects of the plan that are not exclusively within the control of the HMO. Those employees interviewed think that their portion of the premium is too high and that the cost-sharing provisions of the contract are too onerous. The proportion of the premium that employees pay is determined by company policy and not by the HMO. For small-employer HMO plans, co-payments are required by state law; the level of the co-payments is determined by the plan the employer selects. In both cases, however, employees view the HMO as the problem. One source of employee dissatisfaction that is attributable to the HMO is the perceived restrictiveness of the pharmaceutical formulary; this issue was mentioned by every employer and by three of four employees interviewed.
