The Effect of Monthly Cost‐Sharing Limits on Out‐of‐Pocket Costs for Privately Insured Patients
Authors: Shafer Paul , Horný Michal , Dusetzina Stacie 
Published: September 2021

Research Objective

Despite the Affordable Care Act increasing access to health insurance for millions of previously uninsured Americans, underinsurance is a persistent problem. A key contributor to underinsurance is growing enrollment in high deductible health plans for those on the health insurance exchanges and in employer‐sponsored health plans. Because annual deductibles do not reflect the economic realities of how people are paid or how they pay for other expenses, it is worthwhile to consider alternatives to annual cost‐sharing limits as an option for improving access to care.

Study Design

We used the 2018 IBM MarketScan® Commercial Claims and Encounters database to assess changes in patient out‐of‐pocket and plan spending under either a $250 or $500 in‐network monthly out‐of‐pocket maximum. We also estimated spending assuming uncapped out‐of‐network costs or with $500 or $1,000 monthly out‐of‐network out‐of‐pocket maximums. We calculated the percentage of enrollees who would benefit from each scenario and share of total costs shifted back to plans as a percentage of total health care spending under each scenario.

Population Studied

Those under age 65 who were enrolled for the full year, excluding those in HMO or POS with capitation plans.

Principal Findings

Enrollee annual mean and highest month mean out‐of‐pocket costs decreased in all scenarios. For in‐network care, annual mean out‐of‐pocket costs fall by $380 (49%) under a $250 monthly cap and by $269 (35%) under a $500 monthly cap. For out‐of‐network care, annual savings averaged 35% and 22% under the $500 and $1,000 out‐of‐network caps, respectively. When considering savings for the highest month of out‐of‐pocket costs, representing peak burden of cost‐sharing, we estimated mean patient spending decreases between 48% and 68% (from $480 under the status quo). The percentage of enrollees benefitting from these monthly caps ranges from 23% to 37% and the portion of total health care costs shifted from enrollees back to plans ranges from 4% to 7%. The latter estimate reflects potential increases in premiums expected as a result of such a policy change, absent any behavioral effects on health care use.

Conclusions

Instead of a large annual deductible, plans could spread the annual deductible over the year to improve affordability for patients. Patients with acute illnesses could get necessary care without facing a deductible that is more than their monthly take‐home pay, and those with chronic needs would be better able to spread their costs throughout the year instead of facing a single large bill at the beginning of every year. There may be some increases in so‐called inefficient health care use, commonly referred to as moral hazard, due to lower cost‐sharing; however, there is a practical limit to the amount of care that can be scheduled within one month. Conversely, under the current annual cost‐sharing limits, patients who reach their out‐of‐pocket maximum early have the opportunity to use care with no cost‐sharing for a substantial portion of the year.

Implications for Policy or Practice

Monthly cost‐sharing limits could improve affordability of care for those in high‐deductible health plans.