Effect of Premium, Copayments, and Health Status on the Choice of Health Plans

Abstract

Explore effects of comorbidity and prior health care utilization on choice of employee health plans with different levels of cost sharing. Mayo Clinic employees in Rochester, Minnesota (MCR) under age 65 in January 2004; N = 20,379. 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 on employees were merged across insurance claims, medical records, eligibility files, and employment files for 2003 and 2004. 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. 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.