$10 premium hike can prompt patients to shop for other insurers

Price increases above a certain point are linked to measurable losses in market share for health plans.

By — Posted April 11, 2012

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In a study that could predict how people will shop for coverage through state-based health insurance exchanges, University of Michigan researchers found that a modest $10-per-month increase in the price of insurance coverage pushed consumers to shop for a new health plan.

The study, published online Jan. 25 in Health Economics, examined responses to an increase in the out-of-pocket cost for health benefits for 3,182 of the university’s retirees during a four-year period (link).

“What we found overall was that with that $10 increase, you get a 2% to 3% decline in enrollment,” said study co-author Richard Hirth, PhD, a professor at the University of Michigan School of Public Health.

Perhaps more significant than what the study says about university retirees is what it might say about the people who will choose health insurance through health insurance exchanges beginning in 2014, Hirth said.

Younger people tend to be more price-sensitive than retirees, so they are more likely to switch plans when prices go up. For that reason, Hirth said he expects that people buying coverage in the exchanges will change plans based on an even smaller price increase than $10.

But he said there are important differences between the people in his study and those who will buy coverage in the exchanges. For example, exchange shoppers will have more options, and their choices could be presented in myriad ways because of the leeway states have in designing the exchanges.

It’s difficult to predict how consumers will shop in the exchanges, said Judy Hibbard, DrPH, professor of health policy in the Dept. of Planning, Public Policy and Management at the University of Oregon.

“In the exchanges, it’s going to be difficult to compare,” she said. “When you’re trying to process lots of different variables and compare, it’s going to be cognitively difficult. People will take shortcuts. I don’t know what the shortcut will be, but they probably won’t be able to do the comparison that is necessary.”

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