Health Plans

Adjusted health insurance premiums are 18% higher for workers in small companies than businesses with 1,000 or more workers, and premiums of PPOs are 18% higher than premiums of HMOs in part because of increased cost-sharing through copayments, according to a study published in Health Affairs.

For the study, researchers simulated health care bills to calculate the actuarial value for employer-sponsored health plans. Using data from the MEPS Household Component 2002 and the Kaiser Family Foundation/Health Research and Educational Trust Employer Benefit Surveys of 2002-2004, study authors examined the causes of differences between actuarial value and premiums adjusted for the quality of benefits.

According to the study, plan type -- HMO or PPO -- was a greater factor in determining the out-of-pocket maximums an employee would be required to pay for health care than company size. Lower unadjusted premiums for HMOs could be attributed to lower cost sharing and more comprehensive benefits, researchers stated.

The study also noted that four states with large urban areas -- Massachusetts, California, New York and Pennsylvania -- had health plans of the highest actuarial value, while rural states -- Iowa, Mississippi and Montana -- had health plans of the lowest actuarial value.

The authors concluded that the increasing number of plans with copays likely has contributed to the rise of health care spending over the last two decades. According to the study, as many employers consider offering high-deductible health plans to address high health care costs, managed care plans with moderate levels of cost sharing likely will remain an option among employers and workers (Gabel et al., Health Affairs, May/June 2006).