California Employers View Health Care Cost-Sharing as Double-Edged Sword

Employers believe cost sharing encourages workers to spend wisely, but may result in forgoing needed care

Increasing cost sharing by employees is now the most common strategy used by California employers for reining in health care costs.

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February 2, 2005

Increasing employee cost-sharing is now the most common strategy used by California employers for reining in health care costs. But even as they shift costs, employers are concerned about the effects, according to recent surveys commissioned by the California HealthCare Foundation (CHCF) and conducted by Harris Interactive® of California employers, residents, and adults who are chronically ill.

While the strategy has led a majority of employers to feel that their health care costs are more under control today than they were a couple of years ago, more than 75 percent of them now say cost-sharing causes consumers to forgo needed medical care and has a negative impact on individuals with chronic conditions. Over 40 percent of employers also believe that cost sharing reduces the productivity of workers.

Consumers confirmed employer concerns. The survey of the general population of adults in California found that one in seven adults had a medical condition but did not obtain care due to cost in the past year. Non-compliance with recommended medical treatment is particularly common among those with low incomes and those in fair or poor health, according to the survey.

"Employers in California and nationally are increasingly turning to cost-sharing as a way to rein in their own health care costs," said Jill Yegian, director of the Health Insurance Program at CHCF. "Cost-sharing doesn’t reduce the total health care bill, however. In fact, health care costs continue to increase at a double-digit pace."

Survey results from California employers reveal that many believe cost-sharing can encourage consumers to spend more wisely on health care and reduce unnecessary doctors’ visits, but they are slightly less likely to cite these positive advantages than they were in a 2002 Harris Interactive survey of California employers. Not surprisingly, the adult consumer surveys of Californians also found that many are less satisfied with their health benefits than they were a couple of years ago. However, a large majority of those with insurance are at least somewhat satisfied.

California employers’ concerns about the impact of cost-sharing on those adults with chronic illnesses also appear to be justified, based on a related survey, conducted by Harris Interactive, of chronically ill adults in California. Among this population, the survey found that individuals in especially poor health and those with lower incomes are more likely to have problems paying their medical bills than others.

“Chronically ill individuals, particularly those with low incomes, feel the effect of cost-sharing,” said Sophia Chang, M.D., M.P.H., director of the Chronic Disease Care Program at CHCF. “About 20 percent of adults with a chronic condition, such as diabetes, hypertension, high cholesterol, or arthritis, report not going to a doctor, skipping a recommended test or procedure, or not getting their annual check-up due to cost.”

According to the surveys, chronically ill adults in especially poor health or with low incomes are more likely to go without needed care due to cost (e.g., by skipping an annual check-up, not visiting a doctor for a problem, or not using a recommended medical device) than the general adult public in California.

The surveys also found:

  • Other employer strategies for controlling costs, but used less frequently than in 2002, include increasing premium contributions, changing health insurance carriers, and reducing the scope of benefits;
  • Employers are more likely to reduce retiree health benefits in the near future today than they were in 2002;
  • Adults in California are less worried about benefit cutbacks, and more concerned about being able to pay for services;
  • Adults in California with tiered prescription drug benefits are more likely than those with other types of drug coverage to request generics, use less expensive prescriptions, use mail order, or go without filling prescriptions altogether;
  • One out of four employers offer quality ratings to employees and many more are starting to encourage workers to choose better-quality hospitals based on factors such as frequency of procedures or use of electronic prescribing; however, few employees in California seem to be using available quality ratings; and
  • One-third of employers believe that disease management and wellness programs are effective when it comes to improving quality of care.

The survey findings also include consumer perspectives on their confidence in making health care decisions, use of the Internet, and awareness of prescription drug advertising.

The survey findings are summarized in two reports, Health Care in California: Perspectives from Employers and Consumers and California’s Chronically Ill: Coping with Rising Health Care Costs.

About the Surveys

Harris Interactive conducted three surveys. The first survey was conducted by telephone between June 17 and July 14, 2004, among 301 California employers with five or more employees. The second survey was conducted by telephone between June 20 and August 1, 2004, among 1,000 California residents aged 18 and over. The third survey was conducted online between July 6 and 27, 2004, among 3,255 California residents aged 18 and over who have a chronic health condition. Additional details on survey methodology are available in the reports.

About Harris Interactive

Harris Interactive Inc. (www.harrisinteractive.com) is a Rochester, N.Y.-based global research company.

About the California HealthCare Foundation

The California HealthCare Foundation works as a catalyst to fulfill the promise of better health care for all Californians. We support ideas and innovations that improve quality, increase efficiency, and lower the costs of care.

Contact Information

CHCF Communications Officer
California HealthCare Foundation