Guest post by Yao He, Master’s Student in Public Health, Columbia University
Do high premiums discourage enrollment? Or, is a premium of any size a deterrent when it comes to seeking health insurance? How does cost-sharing (deductibles, co-insurance, etc.) play into whether people get the health care services they need? Does income level matter?
The web has been abuzz with talk of health care costs and how they affect our access to and use of health care services. Here’s a rundown on some of the more interesting pieces we’ve read of late:
It turns out that Medicaid premiums can cause enrollees to leave their plans. A new study looked at how income-dependent premiums prompted Medicaid disenrollment in Wisconsin. Medicaid beneficiaries in the state with incomes between 150-200 percent of the federal poverty line (FPL) are required to pay premiums starting at $10/month. Premium amounts increase with income. The study found that the mere presence of a premium – no matter the amount – could increase the likelihood of disenrollment by 12 percentage points. These findings offer food for thought as our own state continues to expand public health benefits. The New York State Legislature recently authorized a Basic Health Program that would include a premium of up to $20/month for beneficiaries between 150-200 percent of FPL, the same income level as those in the Wisconsin study.
If premiums can cause people to leave plans or stay uninsured to begin with, what is the effect of cost-sharing (e.g. deductibles, co-insurance) on people’s health insurance habits? And how might cost-sharing have an impact on health care costs? The answer depends in part on whether a person is healthy or sick, rich or poor…
A famous RAND Health Insurance experiment shows that the higher the cost-sharing in a plan, the less health care services people use – this makes people less costly for insurance plans to cover. But does this mean that higher cost-sharing plans result in health care savings? Not necessarily. More recent research shows that high-deductible plans with low premiums tend to attract healthier people who are naturally cheaper to cover. Moreover, the effect of high deductibles on health care cost reduction may not be sustainable. One study showed a remarkable 25 percent reduction in health care cost in the first year after the high deductible took effect, but reductions in following years were only around five percent.
The RAND study referenced above showed that lower use of care resulting from high cost-sharing does not have an adverse effect on most people’s health, especially if a person is generally healthy. However, this is not the case for those of us who are poor or sick. For people with chronic illness, cost-sharing can cause financial stress and may prompt some to skip recommended services, harming their health. If they happen to be older or live in low-income areas, they can be even worse off. Not surprisingly, less cost-sharing can ease the health and financial burdens on the chronically ill. For example, Medicaid and Children’s Health Insurance Program (CHIP), both public programs, allow those with chronic illness to get care more easily because these plans have very low levels of cost-sharing.
Finally, a new issue brief by the National Health Law Program provides a comprehensive look at how premiums and cost-sharing impact enrollment, service utilization, and health status in the Medicaid population. The brief leaves us with an important message: Medicaid can only serve its purpose to affordable coverage that meets the medical needs of the most vulnerable among us if it has the lowest possible premiums and cost-sharing. Since Medicaid beneficiaries have very low income, they are extra sensitive to the added burden of cost-sharing. At the same time, Medicaid beneficiaries are more likely to have chronic conditions and many health needs, which means unaffordable cost-sharing can force people to stop or delay using services that could improve health. This can bring bigger health issues in the future that cause more harm to people and require more expensive medical services.