Effect of premium, copayments, and health status on the choice of health plans

Abstract

Objective: Explore effects of comorbidity and prior health care utilization on choice of employee health plans with different levels of cost sharing.

Data sources/study setting: Mayo Clinic employees in Rochester, Minnesota (MCR) under age 65 in January 2004; N = 20,379.

Study design: Assessment of a natural experiment where self-funded medical care benefit options were changed to contain costs within a large medical group practice. Before the change, most employees were enrolled in a plan with first dollar coverage, while 18% had a plan with copays and deductibles. In 2004, 3 existing plans were replaced by 2 new options, one with lower premiums and higher out-of-pocket costs and the other with higher premiums, a lower coinsurance rate, and lower out-of-pocket maximums.

Data collection/extraction methods: Data on employees were merged across insurance claims, medical records, eligibility files, and employment files for 2003 and 2004.

Principal findings: As the number of chronic comorbidities among family members increased, the probability of choosing high-premium option also increased. Seventy-two percent of employees with at least 1 family member with comorbidity chose the high-cost option versus 54.7% of employees with no comorbidities. High-premium and low-premium plans seem to subdivide population into discrete risk categories, which may adversely affect the future stability of the insurance plan options.

Conclusions: Various factors affect decision making of employees regarding the choice of plan with different levels of cost-sharing. In a natural experiment setting where all options were redesigned, the health status of employees and their dependents played a very significant role in plan choice.