Few Americans Switch Employer Health Plans for Better Quality, Lower Costs
February 5, 2013 - Less than 2.5 percent of nonelderly Americans in 2010 with employer coverage--about the same proportion as in 2003--initiated a change in health plans to reduce their health insurance costs or get a better quality plan, according to a new national study by the Center for Studying Health System Change (HSC) for the nonpartisan, nonprofit National Institute for Health Care Reform (NIHCR).
Overall, about one in eight (12.8%) people younger than 65 with employer coverage switched health plans in 2010--down from one in six (17.2%) in 2003, the study found.
As was true in 2003, about 5 percent of people with employer coverage switched plans in 2010 because of a job change. However, the proportion of people changing plans for other reasons fell from 12 percent in 2003 to 7.5 percent in 2010.
Of the 7.5 percent who changed plans in 2010 for reasons other than a job change, most switched plans because of a change in their employer’s benefit offerings (62.7%). The other third of plan changes were worker initiated--usually to obtain a less expensive plan or better quality plan. Among all nonelderly people with employer coverage, 2.3 percent changed plans in 2010 in search of better quality or lower costs.
“These findings suggest that consumer choice plays a relatively small role in health plan switching, with most changes resulting from job changes or changes in employers’ plan offerings,” said study author Peter J. Cunningham, Ph.D., HSC senior fellow and director of quantitative research.
The decrease in plan switching parallels a decrease in employer-sponsored coverage among workers in small and medium-sized businesses who change plans more frequently compared to workers in larger firms, according to the study. The rate of employer coverage among workers in firms with fewer than 500 workers decreased from 63 percent in 2003 to 54 percent in 2010, while employer coverage among workers in larger firms--500 workers or more--held steady at about 83 percent.
The rate at which people change health plans is one indicator of the degree of choice and competition in health insurance markets, which many believe are essential to reduce health care costs and improve quality. For people with employer-sponsored health insurance, opportunities to change health plans are largely constrained by whatever choices employers offer.
Previous research shows about half of workers with employer coverage are offered a single plan by their employer, while only about 15 percent have a choice of three or more plans.
National health reform may create opportunities to increase plan choice among people with employer-sponsored coverage, particularly those in small firms, resulting in more frequent switching, the study noted. However, a potential downside of more switching is less stable patient-provider relationships, such as in a medical home.
Based on the nationally representative HSC 2010 Health Tracking Household Survey, the study examined plan switching among 7,600 nonelderly people with employer coverage. Funded by the Robert Wood Johnson Foundation, the survey included a cell phone sample to account for the growing number of households without a landline phone. Response rates were 45 percent for the landline sample and 29 percent for the cell phone sample.
The study’s findings are detailed in a new NIHCR Research Brief--Few Americans Switch Employer Health Plans for Better Quality, Lower Costs--available online at www.nihcr.org/Health-Plan-Switching. Other key findings include:
- Plan switching is more frequent among workers in small firms compared to workers in larger firms. Among people with coverage from a firm with fewer than 100 workers, 12.3 percent changed health plans for reasons other than a job change, compared to 7.6 percent in firms with 500 or more workers, and 5.6 percent among public-sector workers. Most of this difference reflects more frequent changes in plan offerings by small firms, most likely to reduce their insurance costs.
- People with health problems--or who have family members with health problems--are less likely to change plans compared to healthier people. Among people in families in 2010 without an adult with a chronic condition, 9 percent changed plans in the past year, which is double the rate when at least one adult family member has two or more chronic conditions. Similarly, among people in families where all adults are in excellent or good health, 8.4 percent changed health plans, compared to 5 percent of people in families where at least one adult was in fair or poor health.
- People who changed plans in the past year also were more likely to change their usual source of care—the place they usually go for help or advice for a medical problem. Among people who changed health plans in 2010, 13.5 percent also changed their usual source of care, compared to 7.8 percent of people who did not change plans.
Source: Center for Studying Health System Change (HSC).