Patients Are Paying More, But Health Plans Are Not


From 2004 to 2014, patient cost-sharing rose much faster than payments that health plans made for care, according to a report by the Kaiser Family Foundation. Deductibles and coinsurance rose considerably faster than the cost for covered benefits. Average payments toward deductibles still account for a relatively small share of total household budgets, they have been increasing rapidly.

Health care spending has grown fairly modestly in recent years. But, while out-of-pocket costs are growing, wages are remaining largely stagnant. Patients in large employer plans are paying more out-of-pocket. Deductibles are the most visible element of an insurance plan, which may help explain why consumers are showing concern about their out-of-pocket costs. The report reveals the following averages from 2004 to 2014:

  • Patient cost-sharing rose 77%, from $422 to $747.
  • Deductibles accounted for 24% of cost sharing in 2004 and 47% in 2014.
  • Enrollees saw a 256% increase in average deductibles from $99 to $353.
  • Coinsurance payments rose 107%, from $117 to $242.
  • Copays fell 26%, from $206 to $152. Copayments accounted for nearly half of the cost sharing payments in 2004, falling to 20% in 2014.
  • Payments by health plans rose 58%, from $2,748 to $4,354. Large employer plans covered 87% of covered medical expenses in 2004 and 85% in 2014.
  • Workers’ wages rose 32% from 2004 to 2014.

The increase in coinsurance may reflect the strong growth in plans that qualify a person to establish a health savings account; these plans are more likely to have coinsurance than copayments for physician services. Patients are more sensitive to the price of health care with deductibles and coinsurance than they are with copays, which are flat dollar amounts. Also, copays may add up over time while a deductible may need to be met at once, causing affordability challenges

How Benefit Structures Affect Utilization and Spending

Health insurance benefit structures, particularly cost-sharing, can encourage or discourage patients from seeking care, according to a recent study by the National Institute for Health Care Reform (NIHCR). NIHCR looked at contracts between the International Union, UAW, and Fiat Chrysler, Ford, and General Motors in 2011, which significantly changed autoworker health benefits. There was expanded coverage of outpatient physician visits and additional cost sharing for emergency department visits unless the patient was admitted to the hospital. The changes contributed to higher spending in these areas:

  • Advanced imaging
  • Diagnostic tests
  • Minor procedures
  • Prescription drugs

Lower patient cost sharing for physician visits resulted in substantially higher spending as a result of more physician visits and increased diagnostic services and procedures. However, higher cost sharing did not significantly decrease emergency department visits or expenditures.

How Health Coverage Differs Between Small Firms and Large Firms


Small and large employers vary substantially in health insurance offer rates and costs, according to a study by the Kaiser Family Foundation. Small employers are less likely to offer coverage. Also, workers at small firms have higher cost sharing. (The study defines small employers as those with three to 199 workers and large employers as those with 200 or more.)

The smallest employers (three to nine workers) are less than half as likely as are large employers to offer health coverage. While family premiums are less expensive at small firms, covered workers face higher premium contributions and higher higher deductibles. The study reveals the following:

Offer Rates
  • 56% of small employers offer health insurance to at least some employees, compared to 98% of large employers.
  • 47% of very small employers (three to nine workers) offer health insurance.
  • 41% of small employers did not offer coverage because of the cost of health insurance.
  • 18% of small employers offer health benefits to part-time workers compared to 35% of  large employers.
  • 3% of small employers offer health benefits to temporary workers compared to 11% of large employers.
Waiting Periods
  • 81% of covered workers at small firms have a waiting period to get benefits compared to 71% of workers at large firms. The average waiting period is 2.2 months at small firms and 1.8 months at large firms.
  • In the West, average premiums for single and family coverage are lower for workers at small firms than at large firms.
  • Workers for small firms have average annual premiums for family coverage of $17,938 compared to $16,625 for workers at large firms.
  • Since 2010, average family premiums have grown 25% for small employers and 28% for large employers. Dating back to 2000, family premiums have grown 155% for small employers and 180% for large employers.
Premium Contributions
  • Workers for small firms contribute an average of $899 to their premiums for single coverage compared to $1,146 for workers at large firms.
  • Workers at small firms contribute an average of $5,904 for family coverage compared to an average of $4,549 for workers at large firms.
  • Thirty-two percent of workers at small firms contribute more than half of the premium for family coverage compared to just 8% of workers at large firms.
  • Workers’ contributions to family premiums at small employers have increased 27% since 2010 and 204% since 2000.
  • 34% of small employers contribute more for workers enrolled in family coverage than in single coverage compared to 67% of large employers.
Plan Types
  • 19% of workers in small firms enroll in a point-of-service (POS) plan compared to 6% of workers at large firms.
  • 41% of workers in small firms are in a PPO compared to 56% of workers in large firms.
  • 63% of workers for small firms with single coverage have a deductible of $1,000 or more compared to 39% of workers at large firms.
  • 36% of workers at small firms with single coverage have a deductible of $2,000 or more compared to 12% of workers in large firms.
  • Workers with single coverage at small firms have annual deductibles averaging $700 more than those in large firms. The average difference between small and large employers is more than $1,400 for those with family coverage.
  • The average general annual deductible for single coverage for all covered workers at small firms is $1,507 (up 51% from 2010) and $890 for all covered workers at large firms (up 95% from 2010).
  • Many small employers outsource the administrative functions of their health programs. Some employers provide health benefits by entering into a co-employment relationship with a professional-employer organization (PEO). The employer manages the employees, but the PEO hires employees and acts as the employer for insurance, benefits, and other administrative purposes. Five percent of employers with three to 499 workers with health benefits offer coverage with a PEO.
  • 6% of covered workers with health benefits at firms with three to 499 workers are enrolled in a plan offered through a PEO.
Self-Funded Plans
  • 83% of covered workers at large firms are  in a self-funded plan compared to 17% at small firms. The percentage of covered workers at small employers enrolled in a self-funded health plan is unchanged from 1999.

Lack of health insurance literacy leads consumers to make costly mistakes

Even well-versed consumers are unsure about health insurance terms and concepts such as coinsurance, deductibles, copays, cost sharing and allowable charges. The confusion often leads consumers to choose a less-than-optimal plan or avoid seeking care, or they are surprised by higher bills than they expected, experts say. National Public Radio/Minnesota Public Radio (12/29)

More Cost Transparency Needed for Cancer Drugs

Consumers don’t have enough information about cost-sharing for Cancer drugs in order to select the best plan in the insurance marketplaces, according to a study by the American Cancer Society. This updated analysis incorporates 2015 data from marketplaces in California, Florida, Illinois, North Carolina, Texas, and Washington. Researchers found that coverage transparency has improved somewhat since 2014, but significant barriers remain for cancer patients. Researchers found the following:

  • Coverage of newer oral chemotherapy medications was limited in some states in 2015.
  • Coverage for intravenous medications, while noted more often than in 2014, was still unclear in most plans.
  • Cost-sharing structures presented in plan formularies did not match those presented on marketplace websites nearly half of the time.
  • Plans continue to place most or all oral chemotherapy medications on the highest cost-sharing tier, presenting transparency and cost barriers for patients.
  • Nearly half of plans placed a generic oral chemotherapy drug on the highest cost-sharing tier, which may constitute a discriminatory cost-sharing design.

The American Cancer Society recommends that the HHS increase transparency of coverage and cost-sharing, ensure adequate access to medically necessary drugs via an exceptions process, make cost-sharing more predictable and affordable for patients, and monitor the marketplace for evidence of discrimination against people with high-cost conditions, such as cancer.

Rules defining essential health benefits leave a great deal of flexibility for insurers in prescription drug coverage, leading to concerns that some plans may not provide adequate coverage for certain diseases. Increasingly, cancer drugs are targeted to specific molecules involved in the growth or spread of particular cancers, meaning that these drugs are not interchangeable, and most are not yet available in generic form.

Feds clarify interpretation of cost-sharing caps under ACA

Maximum annual cost-sharing limits for health insurance plans apply to each person enrolled in self-only or other coverage, and the limits apply to self-funded and large-group plans, according to a recent FAQ issued by HHS and the Department of Treasury. Employee Benefit News (5/28)

Bill Would End Specialty Tier Cost Sharing

Reps. David B. McKinley R-WV and Lois Capps D-CA introduced a bill that would counteract a trend in today’s health insurance market: moving vital medications into specialty tiers with high cost sharing. The Patients’ Access to Treatments Act (PATA) of 2015 would limit cost-sharing requirements for medications placed in a specialty tier. Specialty tiers commonly require patients to pay a percentage of the cost of the drug co-insurance, which can range from 25% to 50% or higher, resulting in hundreds and even thousands of dollars a month in out-of-pocket costs. New and innovative medications often fall into these tiers.

For people with arthritis, many of these new medications are biologics – a true innovation for people with autoimmune forms of the disease, such as rheumatoid arthritis. These complex medications, made from living organisms, use the body’s immune system to fight the condition, and even halt its progression in some cases. “Cost sharing for a prescription medication should not be so large that it inappropriately restricts or interferes with medically-necessary use of medications,” says Ann Palmer, president and CEO of the Arthritis Foundation. Cost sharing for some arthritis drugs can exceed $1,500 a month.

Employers should think twice before requiring health plan participation, experts say

Some large employers subject to the Affordable Care Act’s mandate to offer health insurance have begun requiring employees to enroll in the company-sponsored health plan and deducting cost-sharing premiums from their paychecks. The practice is legal as long as the plan complies with ACA standards, experts say. However, the practice might be both counterproductive and unnecessary, they say. Kaiser Health News (3/10)

Silver Dominates Exchange Plans

Ninety-three percent of exchange networks are offered on the Silver tier. It’s the only tier in which income-eligible consumers can get federal premium and cost- sharing subsidies, according to a study by McKinsey & Co. More than 60% of consumers who enrolled in an exchange product chose one in the Silver tier. Broad networks have more than 70% of hospitals in the rating area participating; narrow networks have 31% to 70%, and ultra-narrow networks have 30% or less.

Consumers now have an expanded choice of network offerings at the point of health plan purchase on exchanges. Broad networks are available to close to 90% of the addressable population. In addition, narrowed networks are available to 92% of that population; they make up 48% of exchange networks across the U.S. and 60% of the networks in the largest city in each state.

Certain market conditions are associated with having more narrowed networks, such as higher excess bed capacity, more provider or payor fragmentation, and more significant potential for growth from the uninsured.

Seventy-five percent of ultra-narrow, silver-tier plans only include some of the hospitals within participating health systems. Forty-four percent exclude at least one hospital from every single participating health system. Ultra-narrow networks that exclude hospitals from every participating health system are priced an average of 13% lower than ultra-narrow networks containing entire health systems.

Forty-two percent of consumers who enrolled in an ACA plan and were aware of the network type purchased a plan with a narrowed network. However, 26% of those who enrolled in an ACA plan were unaware of the network type they had selected. For more information, visit

Employers Hit With More Cost Sharing for Expensive Drugs

Twenty-eight percent of employees now offer four-tier drug plans compared to only 12% that had these plans in 2012, according to a survey by United Benefit Advisors. With a four-tier plan design, employers can put the most expensive drugs in a category with significantly higher copays — thus passing along the costs to employees.  The fourth tier pays for biotech or the highest cost drugs. Median pharmacy retail copays for fourth-tier drugs increased 25% from $80 in 2012 to $100 in 2013, and many are charging 10% to 30% of the cost of tier four drugs.

Carol Taylor, an employee benefit advisor with a UBA partner Firm said, “We are seeing more and more employers, small and large, raising copays substantially on fourth-tier drugs. With some of these drugs, the cost ranges from $1,200 to $20,000 per month (the cost of some cancer drugs). It is very costly for the plans, which in turn affects their premium rates. We’ve seen this for quite some time with self-funded plans, but we expect it will become more popular among small and large employers with group health insurance.”

The average tier-four median copay was $52 for small employers (less than 100 employees), from $45 to $60 for mid-size employers (100-499), and $80 to $100 for large employers (500+).

Larger groups are rated more independently, so they have a much bigger incentive to raise copays, especially for items that will cause rate increases. This might shift some as employers are forced to come into compliance with health care reform in 2015 since the prescription copays/deductibles, etc. must all track to the out-of-pocket maximum, said Rob Calise, UBA Board chairman noted that, he said.

Seventy-three percent of prescription plans had a copay and/or coinsurance after the major medical deductible compared to 68% in 2012. “It used to be that all drugs were applied to the deductible, then coinsurance on major medical. Now, quite a few carriers require deductible and then copays, particularly on high-deductible health plans. We’re also seeing small group and mid-market employers place generic brands before the deductible, but brand names after. The ultimate goal of shifting more cost to employees is to drive behavior to create better health care consumers. It is very possible we could see copays disappear completely, with everything falling under the major medical deductible,” he added. For more information, visit

Last Updated 06/29/2022

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