Individuals and Small Businesses Face Tough Cost-Driven Health Care Choices

Higher charges at point-of-service combine with more complex benefit options

As health care costs continue to rise, individuals and small employers are being asked to pay more or consider scaled-down benefits when purchasing coverage, according to the first report in a new California HealthCare Foundation (CHCF) series that tracks insurance market trends in the state as they develop.

Analyzing new benefits introduced in California’s health insurance market over the last nine months, the study shows that health plans are passing more costs on to enrollees in the form of higher charges at various points of care delivery. They also offer what may seem a bewildering array of a la carte choices among benefits that were once standard fare in many insurance products. Choosing among options requires consumers to make difficult tradeoffs between higher cost-sharing at the time of care versus lower monthly premiums.

The series, Trends and Analysis in Insurance Markets, commissioned by the California HealthCare Foundation, will issue periodic reports examining changing market conditions and how they affect Californians’ access to quality care. The initial report looks at examples of typical insurance products now available in the individual and small group markets.

“We’re seeing higher deductibles, more per-admission charges and added costs associated with different tiers of providers,” said Marian Mulkey, M.P.H, M.P.P., CHCF’s program officer for health insurance markets and the uninsured. “The added complexity requires clear information for intelligent decision-making.”

Many new features offered to small businesses may involve unanticipated costs:

  • Purchasers may be asked to choose between options for in-network care, for example, one with coinsurance at 25% of a “negotiated fee,” and another with coinsurance at 25% of an “allowable” or “usual and customary” amount. Yet neither definitions of terms nor dollar amounts are commonly published, making it difficult to determine costs prior to care.
  • Complicated rules regarding deductibles and annual maximums require sophisticated calculations to predict patient costs.
  • HMO enrollees accustomed to comprehensive benefits may encounter new PPO-style cost sharing, such as two-tier pricing for in-network hospitals and co-pays or deductibles for care at hospitals.

In the even more price-sensitive individual market, newly introduced cost-sharing arrangements include:

  • In-network maternity copayments of as much as $1,000 in some HMO products;
  • Increasing coinsurance for well-baby care to as much as 30 to 50% in some PPO products; and
  • Raising annual out-of-pocket maximums for in-network providers to $2,500 to $4,000 for a single person.

“As consumers face more cost-sharing in health care, some ground rules regarding the conditions under which benefits are offered would be helpful,” Mulkey noted. “Consistent benefit terminology across products and plans and standardized examples showing out-of-pocket costs for pre-defined medical conditions could help inform consumers.”

Results are based on an ongoing study tracking the benefits and prices being offered by health plans in the counties of Fresno, Los Angeles, Sacramento, San Diego, San Francisco, and Shasta. The study is being conducted by Joan B. Trauner, Ph.D. in conjunction with Acordia of California and Katherine B. Wilson. The report, Small Businesses and Individuals Face Greater Cost-sharing and Increasing Complexity, is available for download at the page listed under Related CHCF Pages.

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About the California Health Care Foundation

The California Health Care Foundation is dedicated to advancing meaningful, measurable improvements in the way the health care delivery system provides care to the people of California, particularly those with low incomes and those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford.