INDUSTRY: Employer based health insurance–pay more, get less

Part of the reaction from employers to rising health care costs has been to push more co-payments, higher deductibles and larger out-of-pocket maximums onto employees. This has been viewed as an easier approach than increasing share of premium contribution, even though it has led to severe labor disputes in many cases. Ignore the fact that employment based insurance is a dumb idea–it just happens to be the way it’s done in real life. But what about people going through the process of paying more and getting less from their employer?

A new study from Sally Trude at the Center for Studying Health System Change called Patient Cost Sharing: How Much is Too Much? looks at the hypothetical actuarial impacts of a move towards higher deductibles, OOP maximums and co-pays. As you’d expect, it impacts most on sicker and poorer employees.  In fact for those very rare employees earning below 100% of Federal poverty but actually getting health insurance from their employer (and that must be virtually a null set), 44% of those with a deductible of over $1,000 will be spending more than 10% of their gross income on health care.

According to the Center’s survey research "most Americans, especially lower-income people, are willing to limit their choice of hospitals and physicians in return for lower out-of-pocket costs".  But given the shellacking managed care companies got when they tried that last time, don’t expect too many of those restrictive products to be rushing onto the market any time soon (although Blue Cross is trying to pull it off in California). Trude concludes:

    Employers continue to increase patient cost sharing to reduce annual premium increases and to encourage workers to economize when using health care services. As out-of-pocket costs increase, however, both the financial and medical consequences for seriously ill and low-income people increase. Nearly half of all personal bankruptcies are due in part to medical expenses. And research suggests that patients faced with higher cost sharing cut back on both needed and discretionary care.

The debate on user fees via the Rand experiment, Evans and Barer at UBC et al, basically concluded that point of service user fees have no impact on overall health care costs but do tend to stop the poor and sick going to the doctor (meaning that minor problems become major). So from a health policy perspective employers ought to be transferring their cost cutting to the front-end–and demanding more cost sharing in premiums.  However, that translates to all employees feeling the pain, rather than just those who are sick feeling it when they are sick.

By the way, I’m currently doing some other work looking into a number of these system problems, so if you have any suggestions about things to look into in the world of clinical or care inefficiencies please let me know.

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