EBRI Issue Brief

Managing Use of Health Care Services After People Satisfy Their Deductible: What Do Copayments and Coinsurance Do?

Nov 19, 2020 18  pages


One of the strongest trends in employment-based health benefits has been the adoption by employers of high-deductible health plans (HDHPs).  As a result, the percentage of individuals with private insurance who were enrolled in an HDHP increased from 17.4 percent to 46 percent between 2007 and 2018.  Further, deductible levels have been increasing more generally regardless of whether someone is enrolled in an HDHP.

Recent research found that many high-cost claimants not only reach their deductible but often reach their maximum out-of-pocket limit.  In essence, for these individuals, use of health care services early in the year affects what they pay for health care services at the end of the year.  Because deductibles are often satisfied early in the year by high users of health care services, it can be argued that it is the end-of-year price that matters most when individuals are deciding whether to use a health care service even before the end of the year is reached.  This phenomenon raises questions about the effectiveness of deductibles in controlling spending.  But it also raises questions about the relative effectiveness of different types of cost sharing later in the year — such as copayments and coinsurance — once an individual reaches his or her deductible.

The purpose of this paper is to examine the differential effect of copayments and coinsurance on use of health care services.  Our findings have implications for the effectiveness of deductibles, particularly once they are satisfied.  Why would we expect to find differences in behavior by whether an individual faces copayments or coinsurance after they reach their deductible?  Prior studies often found that individuals are not forward-looking when it comes to prices for health care.  The same may be true when it comes to type of cost sharing.  Before an individual reaches their deductible, they will know what the price of health care is if they face copayments after reaching their deductible.  Copayments are well-defined and known before health care services are used.  Coinsurance is less well-defined when it comes to knowing the price of a health care service in advance of using the service.  The uncertainty of coinsurance relative to the certainty of copayments may mean that coinsurance has a differential impact on use of health care services compared with copayments.

Key Findings:

  • Coinsurance reduces use of inpatient care and specialist physician office visits more than copayments do.
  • However, while most employers already use coinsurance for inpatient care, only 44 percent use coinsurance for office visits.
  • This suggests that employers seeking to manage use of health care services and spending — especially among high users of health care services — may look to moving from copayments to coinsurance for office visits as a way to do so.