Insurance Markets Ready or Not: Consumers Face New Health Insurance Choices TRENDS&ANALYSIS July 2003 Introduction premium contributions and out-of-pocket costs Not long ago, most working Californians, at least at the point of care increase in the past year (see those working for large or midsize companies, Figure 1). could expect a standard health care benefits Figure 1. Insured Californians Who Have package. Typically, workers were offered compre- Experienced Cost-sharing Increases in the Past Year hensive benefits and low out-of-pocket costs, sometimes with a restricted network of providers. Insured Californians All Those with a Chronic Illness Today, the choices are more complicated — and Employer-based 51% more expensive. In recent years, most companies Insurance Premium Contribution 56% have asked their employees to share more of the costs of their health coverage. Consumers, as a Individual 65% Insurance Premium 77% result, have had to make more decisions about their medical care. Prescription Drug 43% Cost Sharing 47% Two recent surveys of Californians — one of 34% adults and one of chronically ill adults — Physician Visit Cost Sharing 38% conducted by Harris Interactive Inc.® for the 0% 10% 20% 30% 40% 50% 60% 70% 80% California HealthCare Foundation examined the impact of these health-benefit trends. This report highlights key findings from these surveys. These increases have led significant numbers of It underscores the difficult choices facing the consumers — especially those with lower incomes chronically ill, particularly those with lower and those with greater health care needs — to incomes, who are paying more of their own reduce their use of health care services. Among all health care costs. insured Californians, the response to increased cost- sharing was relatively small: one in six (17 percent) Patients Pay the Piper of those whose out-of-pocket costs for physician To partially offset rising health insurance office visits increased in the past year postponed premiums, employers have increased employees’ or skipped a visit to a doctor as a direct result of share of company-sponsored health-plan costs. the increase (see Table 1). Among those whose Many California consumers have seen both their prescription drug costs increased in the past Table 1. Behavior Changes as a Result of Increases in Cost Sharing, Insured Californians and Insured Californians with a Chronic Illness INSURED CALIFORNIANS Those with a Chronic Illness, by Income Level B E H AV I O R All All <$25,000 $25,000 to ≤ $50,000 $50,000 to ≤ $100,000 $100,000؉ Physician visits Postpone or skip a visit to the doctor 17% 29% 46% 33% 24% 17% Switch to a different doctor 7% 3% 5% 4% 2% 5% No change in behavior 69% 69% 50% 63% 75% 81% Prescription drugs Ask doctor for a generic medication or a less expensive alternative to an existing medication 47% 41% 40% 51% 39% 33% Did not fill a prescription 9% 16% 29% 22% 11% 12% No change in behavior 38% 46% 44% 37% 49% 51% year, nine percent responded by not getting a prescrip- yet widespread. Relatively few Californians have seen tion filled. However, the chronically ill are much more or used ratings of doctors, hospitals, or health plans in likely than Californians overall to postpone or skip a the past year (see Figure 2). Despite the availability of doctor visit or to fail to fill a prescription after a cost- new information regarding patient safety and satisfact- sharing increase. And the response of the low-income ion with plans and providers, most Californians do not (<$25,000 annual household income) chronically ill believe there are big differences in the quality of care was dramatic — this group was almost three times as offered by the doctors, hospitals, and health plans in likely as insured Californians overall to postpone or skip their area (see Table 2). a visit and more than three times as likely to fail to fill Figure 2. Californians Who Have Seen Information that a prescription. Rates Plans and Providers in their Community, by Annual Household Income Quality Ratings: Not Ready for 36% < $35k Prime Time? $35–75k $75kϩ Many consumers are taking a more active role in their 31% 27% 28% own health care decision making, and with good 25% 27% reason. As employers pass along more of their health 22% 18% care costs to employees — often providing incentives to 17% select less expensive drugs and lower cost providers — 9% consumers must assess certain cost-quality trade-offs. 9% 9% 7% To do so, they need information that compares the relative cost and quality of their health care options. 0% Hospitals Health Plans Doctors However, consumer use of quality ratings, which give them an objective way to evaluate their choices, is not 2 | C ALIFORNIA H EALTH C ARE F OUNDATION Lower-income consumers are somewhat less likely than confidence in their ability to make health benefit others to see quality ratings and less likely to discern decisions based on their knowledge of common health quality differences among the health care choices insurance terms (see Table 4). Consumers are most available to them. The health care industry’s emphasis familiar with the terms copayment and deductible, and on Web-based distribution of health care information least familiar with coinsurance (the percentage of a may account for this, since the lower income group is claim paid by the patient, usually 20 percent) and less likely to be online. formulary (the list of approved prescription drugs that a health plan will cover). Table 2. Californians Who Believe Big Differences in Quality Exist Among Plans and Providers in their Area Table 3. Insured Californians’ Assessment of Know- ledge About their Health Plans’ Restrictions CALIFORNIANS INSURED CALIFORNIANS PLAN/ Income Level PROVIDER All < $35,000 $35 to 75,000 $75,000؉ KNOWLEDGE Income Level LEVEL All < $35,000 $35 to 75,000 $75,000؉ Hospitals 35% 25% 36% 41% A great deal 26% 15% 27% 33% Health plans 38% 28% 42% 46% A fair amount 44% 40% 46% 45% Family doctors 34% 30% 39% 35% Very little 23% 32% 22% 17% Specialists 36% 29% 41% 37% Nothing at all 6% 10% 3% 6% Understanding the New Rules Table 4. Insured Californians Who Are Very Confident of the Game in their Ability to Make Health Benefit Decisions Based on their Understanding California embraced HMOs many years before managed of Common Health Insurance Terms care became the dominant benefit model in the rest of INSURED CALIFORNIANS the nation. The relatively simple cost-sharing devices, Income Level TERM All < $35,000 $35 to 75,000 $75,000؉ such as copayments, long used by HMOs, are giving Copayment 49% 33% 51% 57% way to more complex mechanisms, such as coinsurance Deductible 46% 31% 49% 55% and tiering. These new requirements make it more diffi- Premium 43% 27% 44% 53% cult for consumers to assess the financial consequences Out-of-pocket maximum 41% 23% 45% 52% of treatment decisions, such as their use of a given Coinsurance 31% 23% 30% 37% specialist or drug. Currently, most insured Californians Formulary 21% 15% 21% 24% know at least a fair amount about their plan’s restrict- ions. However, knowledge of health plan restrictions falls sharply as income decreases: 33 percent of Californ- ians with household incomes of $75,000 or more per year say they know a great deal about their health plan’s restrictions, compared with only 15 percent of those making less than $35,000 annually (see Table 3). Californians with lower incomes also express less Ready or Not: Consumers Face New Health Insurance Choices | 3 Change Brings Anxiety Conclusion Greater exposure to rising health care costs has increased Financial barriers to care are no longer limited to those Californians’ anxiety about paying for care. The propor- without health insurance. Recent health benefit trends tion of California consumers who are very or somewhat have increased insured Californians’ exposure to health concerned about paying expensive medical bills not care costs. Long a concern of policymakers and business covered by insurance has risen from 32 percent in 1997 executives, the rising costs of care and the growing com- to 43 percent in 2002 (see Table 5). The proportion plexity of health plan coverage have become a concern worried that they will be unable to afford medical care of millions of consumers as well. Higher out-of-pocket when needed has also grown significantly since 1997. costs disproportionately impact the chronically ill, In contrast, concern about discontinuation of especially the low-income chronically ill, who are employer-sponsored health coverage has remained much more likely than others to forgo care as a result stable. Apparently, most workers consider it unlikely of increased cost sharing. Public policymakers as well that their employers would drop such an important as employers should be aware of the risks of cost benefit. But this finding also may reflect changes in containment efforts, and find ways to minimize them. the nature of insurance itself. In the past, many plans, As their share of medical expenses increases, consumers especially managed care plans, offered comprehensive must be better informed about the cost and quality of coverage with low out-of-pocket costs. The trend their health care options. Many of the options intended toward higher out-of-pocket costs may help restrain to increase consumer choice and accountability — such further premium increases (and presumably ensure as tiered plans that increase the consumer’s costs for continued coverage) but leaves consumers more exposed using more expensive providers or medications — require to — and concerned about — financial barriers to care. considerable sophistication on the part of consumers. Table 5. Californians Who Are Very or Somewhat Most insured Californians say they know at least a fair Concerned About Paying for Care amount about their plan’s restrictions, but few have AREA OF CONCERN 1997 2002 used available information resources to compare the Health insurance becoming too expensive 49% 45% quality of their health care options. To help employees Paying expensive medical bills not covered by insurance 32% 43% make good choices, companies should consider more Loss of health insurance for children 44% 42% extensive consumer education efforts, including the use Inability to get required health care when ill of quality ratings of providers and plans. due to excessive cost 32% 41% Losing health insurance coverage due to job loss 44% 38% Substantial cut backs of benefits under current health plan 44% 38% Employer discontinuing health benefits 28% 29% Increases in employer’s health care costs are limiting wage increases 31% 28% 4 | Ready or Not: Consumers Face New Health Insurance Choices Methods was used to weight the data from the Internet survey. A representative sample of 1,000 Californians 18 or older Data from the Internet survey were also adjusted to participated in a 20-minute telephone survey between reflect the population of Internet users. October 24 and November 18, 2002. The survey data were weighted by gender, age, race, education, and F O R M O R E I N F O R M AT I O N health insurance status to reflect the demographic composition of the California population using the Additional information from this study is available at www.chcf.org. A companion Trends and Analysis report, March 2002 Current Population Survey. titled “Health Benefit Costs: Employers Share the Pain,” Results for chronically ill Californians are based on a focuses on trends in employer-sponsored health insurance and is also available at www.chcf.org. 20-minute Internet survey conducted between November 26 and December 9, 2002. The survey was self-administered online to a sample of 3,465 California Future editions will identify trends in California’s residents 18 or older who have a chronic health condi- insurance markets, analyze regulatory and policy tion. The initial sample was drawn from the Harris issues, and provide industry updates. Analyses Poll Onlinesm panel. Respondents were categorized as will be posted as they become available at the California HealthCare Foundation’s Web site at chronically ill if, due to a health condition that has www.chcf.org. lasted, or is expected to last, at least 12 months, they met at least one of the following criteria: The California HealthCare Foundation’s program area on Health Insurance Markets and the ■ Currently need or use a prescription drug; Uninsured seeks to improve the functioning of ■ Need or use more medical care, mental health California’s health insurance markets, particularly the small group and individual markets, and to care, or other health services than usual for expand coverage to the uninsured. For information their age group; on the work of Health Insurance Markets and the ■ Are limited in their ability to do things most Uninsured, contact us at insurance@chcf.org. people their age can do; ■ Need or get special therapy, such as physical, occupational, or speech therapy; or ■ Need or get treatment or counseling for a mental or emotional problem. The screening questions were asked in both the tele- phone survey of California adults and the Internet survey of Californians with a chronic illness. The demographic profile of adults with a chronic condition obtained from the initial telephone survey of all adult Californians CALIFORNIA HEALTHCARE FOUNDATION | 476 Ninth Street, Oakland, CA 94607 | tel: 510.238.1040 | fax: 510.238.1388 | www.chcf.org