High Insurance Costs Linked to Abundance of Complex Choices

Philip Betbeze, August 10, 2012

Like consumers, employers are always shopping for a better deal. Nowhere is that more apparent than in shopping for health plans. Some employers change health plans regularly in search of ways to insulate themselves against the ever-spiraling costs of healthcare.

Ironically, that may be a big reason why health insurance premiums stay so stubbornly high, according to an award-winning paper by three researchers at The Center for Health Care Research and Policy, a joint program by MetroHealth and Case Western Reserve School of Medicine.

While executives at small companies might believe their escalating insurance costs are attributable to pre-existing conditions and bad lifestyle choices by their employees, the research shows that is only part of the problem.

An equally big cause of rising prices is the fact that insurance companies offer such a wide array of benefits, conditions, and stipulations in their small group health plans, that employers perceive that there is always a better deal available elsewhere. This contributes to a high churn rate for those companies that provide employee health insurance. Further, the high churn precludes investment in care management and disease management programs that require a long-term investment to pay off.

"We were interested in the fact that the turnover rates for policyholders were very high," says Mark Votruba, a Case Western Reserve School of Medicine associate professor of economics and medicine, and one of the paper's authors. "What kinds of disincentives does that create in financing care to improve health down the road?"

Philip Betbeze

Philip Betbeze is the senior leadership editor at HealthLeaders Media.


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