As health insurance premiums steadily increase, employers have increasingly shifted costs onto workers. Employees’ shares of monthly premiums have gone up, as has cost-sharing for various services.
The whole idea is to save money and reduce the employer’s health spending burden. It might, however, come with a hidden cost. A new working paper from Truven Health Analytics’ Teresa Gibson, Harvard’s Michael Chernew and the University of Michigan’s Mark Fendrick finds that as co-payments go up, productivity drops — most likely as a result of employees skipping out on care altogether.
The team focused on those with chronic pain such as arthritis. They then looked at how much employees had to pay for prescription medication under their various benefit structures. Previous research has shown that as the cost of health-care services increases, usage decreases — workers simply don’t fill as many prescriptions when prices get higher.
On average, employees with chronic pain had 76.7 hours absent from work. But with every $5 increase in cost-sharing for pain medications, they saw an increase in absenteeism in the ballpark of 1.3 to 3.1 percent.
That may seem small, but as the researchers explain, the consequences could be quite large, enough to offset any savings the higher co-payments generate for that employee:
“If we assume that a $5 increase in cost-sharing (20 percent) is associated with a 1-hour increase in absence (about 1.3 percent), this would be valued at $42/hour fully loaded with fringe benefits (workers in private industry, large establishments). Alternatively, the average hourly earnings for Americans overall is about $31 loaded. The $31 to $42 an hour in absence-related costs would offset any employer savings associated with raising co-payments.”
Keep in mind, these are the costs for one individual and not a full analysis of the pros and cons of increased cost-sharing. A company may be generating savings with the higher co-pays among other, healthier beneficiaries. It does, however, suggest that raising cost-sharing in health insurance is not necessarily just about saving — it’s also about spending.
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