Shifting Health Insurance Costs to Workers Can Save Employers More than Reducing Benefits, Study Says

Employers who increase employees' share of health insurance costs can save "as much as or more than" those who reduce benefits, according to a Health Affairs study published June 19. In the report, Jason Lee, a senior research manager at the Academy for Health Services Research and Health Policy, and Laura Tollen, a senior policy consultant for the Kaiser Permanente Institute for Health Policy, found that employers who shift from health plans that require employees to pay $15 copayments for benefits with no deductible to health plans that require employees to pay 20% coinsurance and a $500 deductible reduced their costs by 22%, based on an actuarial model. They would save "roughly the same" amount as employers who place a $100,000 limit on coverage and eliminate coverage for prescription drugs, hearing and vision care, durable medical equipment and mental health and substance abuse care, the report found. The report also found that "higher cost-sharing and reduced benefits may reduce health care costs by making enrollees more aware of the health care use and thus smarter shoppers." However, the authors "strongly caution" that the trend toward increased cost-sharing for employees may "disrupt" the health insurance market. According to the report, as the "healthiest people favor less costly plans with higher cost-sharing, it drives up premiums in plans with lower cost-sharing and fuller benefits." The authors also warn that increased cost-sharing for employees could lead to a "consumer backlash" resulting in a "stratification" of the health insurance market as "wealthy people buy their way out" of managed care plans (Health Affairs release, 6/19). The report is available online.