Cost sharing rose only modestly in 2004, compared to larger increases observed in recent years. While increases in deductibles in each plan type are not significantly different from last year, increases since 2001 are significant. For example, deductibles for PPO plans, the most common type of health plan, rose by nearly 40% since 2001. The percentage of covered workers facing a $20 copayment for physician office visits increased to 27% in 2004 from 19% in 2003. Since 2001, the percentage of covered workers in HMOs facing a $20 copayment for physician office visits increased from only three percent to 22%.

As in previous years, covered workers in all small firms (3-199 workers) face higher average deductibles than workers in all large firms (200 or more workers). Over half of covered workers now have additional cost sharing for inpatient hospital services. Research has demonstrated that higher copayments and deductibles reduce spending on health care, but may also discourage use of needed services, particularly among lower income individuals.⁸

• Workers face many different forms of cost sharing. More than three quarters of workers with single coverage contribute to their monthly health insurance premium and similar percentages face cost sharing such as copayments for prescription drugs and office visits (Exhibit 7.1).
  • The vast majority of covered workers face a fixed dollar copayment rather than a percentage coinsurance when they visit a physician (Exhibit 7.9).
• Over the last year, the percentage of covered workers with a $20 copayment for office visits grew from 12% to 22% in HMO plans and from 14% to 36% in POS plans. Overall, 27% of covered workers are in a plan with a $20 copayment, up from 19% last year (Exhibit 7.6).
• Almost half (49%) of covered workers with single coverage have no annual plan deductible. The average plan deductibles shown in Exhibits 7.2 through 7.4 are calculated by assigning a value of $0 for covered workers in plans without an annual deductible.
  • Annual deductibles in PPO plans—the most common plan type—are stable in 2004. Average deductibles for single PPO coverage are $287 for preferred providers and $558 for nonpreferred providers. If workers without deductibles were excluded from the calculation above, the average PPO deductible for single, preferred provider coverage and the average PPO nonpreferred deductible would be $595 (Exhibit 7.2).
  • Only a small percentage of covered workers in HMO plans (9%) face an annual deductible.
  • Deductibles are higher for covered workers in all small firms (3-199 workers) than all large firms (200 or more workers), across all types of plans. For single coverage in PPO plans, average deductibles for preferred providers are $420 in all small firms and $232 in all large firms (Exhibit 7.3).
• When admitted to a hospital, the majority of covered workers in HMO, PPO, and POS plans face separate cost sharing in various forms such as a deductible, copayment, coinsurance, or a per diem charge (Exhibit 7.10). On average across all plans, covered workers with deductibles or copayments for inpatient hospital admissions pay $224 per hospital admission (Exhibit 7.11). Covered workers facing coinsurance pay a coinsurance rate of 16%, on average (Exhibit 7.12).
• Tiered cost-sharing arrangements, where the health plan varies enrollee cost sharing for network hospitals or physicians based on their costs and quality, remain uncommon. Ten percent of workers enrolled in HMO plans have a tiered provider arrangement, six percent of covered workers in a PPO plan have such an arrangement, and 16% of workers enrolled in a POS plan have a tiered provider network arrangement (Exhibit 7.13).