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1 Health Plan Switching: Choice Or Circumstance? Data from the Community Tracking Study give a glimpse of who among the privately insured are likely to switch plans, and why. b y P e t e r J. Cu n n i n g h a m a n d L i n d a Ko h n 158 Ch a n g i n g h e a l t h p l a n s may be beneficial to the extent that it results from consumers decisions and preferences about what type of health plan best suits their health care needs. On the other hand, consumers today are not only choosing a plan to finance the use of services, but within that decision are also choosing a delivery system or network of providers. Therefore, changing health plans may lead to a change in physicians, which may prove harmful to continuity of care, access, and quality. 1 The extent to which changes in health plans are beneficial or potentially harmful depends on the answers to several key questions: How frequently are changes made, especially by vulnerable populations who are already at risk for problems with medical care access and quality? To what extent is changing plans voluntary (for example, consumers exercising choice) or involuntary (for example, forced changes by employers)? How often does changing health plans lead to a change in the place that persons usually receive medical care? Previous studies have been limited to the experience of a single company, which makes it difficult to generalize to the privately insured population as a whole. 2 Using data from the Community Tracking Study (CTS) household survey, this study is among the first to examine consumers switching among private insurance plans nationwide. Data And Methods n Data. The CTS is a major initiative of the Robert Wood Johnson Foundation (RWJF) to track changes in the health care system over time and to gain a better understanding of how health system changes are affecting people. 3 The CTS household survey was designed to produce representative estimates for the U.S. population as well as for sixty randomly selected communities. The sample was based on random-digit dialing, as well as on a small field sample to represent households without telephones. A family respondent was selected to report on health insurance coverage (among other factors) for other persons in the family included in the survey (all adults and one randomly selected child). 4 The overall response rate for the household survey was 65 percent for families. The sample includes 32,732 families and 60,446 individuals. The sample for this analysis includes 37,545 nonelderly persons who were privately insured throughout the survey year ( ). 5 n Determining plan switching. We include both employer-sponsored private insurance and private insurance plans that are purchased directly by the enrollee. For persons covered by private insurance on the day of the interview, a change of health plans was considered to have occurred if they first enrolled in their current plan during the prior twelve months and if their previous plan was also Peter Cunningham is a senior health researcher at the Center for Studying Health System Change, in Washington, D.C. Linda Kohn is a senior program officer at the Institute of Medicine (IOM) and codirector of the IOM s Quality of Health Care in America project. 2000Project HOPE ThePeople-to-PeopleHealth Foundation, Inc.

2 private insurance (asked in the survey). Persons continuously covered by the same private insurance plan throughout the twelve months prior to the interview were considered to have not changed plans. Respondents also were asked whether their current and previous plans were health maintenance organization (HMO) or non-hmo plans. Health Plan Switching: A National Profile n How many people change health plans? About 17 percent of privately insured persons changed their health plan during the year prior to the survey. About two-thirds of persons who changed plans stayed in the same plan type (Exhibit 1), while about one-fourth switched from a non-hmo to an HMO, and 10.5 percent of changers switched from an HMO to a non-hmo. n Why do people change plans? Most changes were made for reasons other than consumer preference. About one-third cited a change in employment, while 36.3 percent cited a change in employer plan offerings. Just under one-fourth changed plans because of some desired attribute of their current plan, including 16 percent who changed because the current plan is less expensive and about 8 percent, because their current plan has better services, higher quality, preferred doctors, or more convenient locations. About 4 percent changed plans because of a change in their eligibility (not shown), usually a change in marital status or eligibility for a parent s plan. About another 4 percent changed plans for other miscellaneous reasons, or the reason was not ascertained (not shown). Persons switching to an HMO were more likely than other types of plan changers were to cite lower cost as the reason for changing plans. Despite the so-called consumer backlash against managed care plans in recent years, persons disenrolling from HMOs were only slightly more likely than persons switching to HMOs to cite better services as the reason for change, although the difference was not statistically significant. If disgruntlement with HMOs is a major reason for switching to non-hmos, then it would have to be related to a change in employment. Persons disenrolling from HMOs were more likely than other plan changers were to cite a change in employment as the reason for their change, while significantly fewer persons switching to an HMO did so as a result of a job change. This also suggests that it is much more difficult to draw the line between what represents a voluntary versus an involuntary change of plans. While termination of employment could result in an involuntary 159 EXHIBIT 1 Types Of Change And Reasons For Changing Health Plans, All plan changers 100.0% 31.9% 36.3% 15.9% 7.9% HMO enrollees (changed from a non-hmo to an HMO) HMO disenrollees (changed from an HMO to a non-hmo) a 23.6 a 12.7 a 11.1 Changed plans but stayed in an HMO a a 9.5 Changed plans but stayed in a non-hmo a a 5.1 a SOURCE: Community Tracking Study household survey. NOTE: Sample includes only people continuously insured through private sources. a Difference with persons switching to health maintenance organizations (HMOs) is statistically significant at the.05 level. H E A L T H A F F A I R S ~ M a y / J u n e

3 160 change in plans, the scope and generosity of health benefits also may play a role in the decision to leave a job or accept a different job. In addition, employers may change their offerings as a cost-effective way to make their total compensation package more attractive to both current and prospective employees. On the other hand, voluntary changes in plans usually take place within a choice set that is constrained by both what an employer offers and what the individual can afford. Only about half of workers whose employer offers coverage have a choice of more than one plan. 6 Even when workers have a choice, these may be restricted in number, type, and cost. n Who is most likely to change plans? To the extent that one views changes in health plans as a potential problem (that is, leading to disruptions in care), there may be particular concern about plan changes for certain vulnerable populations who either have high health care needs or already are more likely to experience problems with medical care access and quality. However, as shown in Exhibit 2, near-elderly persons (ages fifty-five to sixty-four), blacks, Hispanics, and persons in fair or poor health were less likely than others were to change health plans. 7 In addition, changes of health plans were no more frequent among persons with lower incomes or less education. When they do change plans, blacks and persons in fair or poor health who start out in non-hmos are more likely to switch to an HMO. Blacks who decide to change plans may have either more constrained choices or greater preferences for HMOs, which usually entail lower costs. Stronger preferences for HMOs among blacks would be consistent with a previous study that found that blacks expressed greater willingness than whites did to give up some choice in health care to save on costs. 8 Persons with more-serious health problems also may prefer HMOs when they switch plans to save on out-of-pocket costs (especially since their health care use and costs tend to be much higher than average). The findings also suggest that favorable selection practices among HMOs to the extent that they exist are not so rampant as to prevent persons with high health care needs in general from switching to HMOs. On the other hand, the greater use of services among those in fair or poor health also means that switching to an HMO may entail a greater risk if it means a disruption in their care arrangements and the providers they normally see. n Does greater choice lead to more plan switching? Although one might expect that having a choice of plans through an employer would lead to more plan switching, persons offered only a single plan change as often as do those with some choice (presumably because of an employer action). 9 However, when people do change health plans, having a choice is associated with a higher likelihood of switching to an HMO. This likelihood is as high for those who are offered a choice of HMO and non-hmo plans as it is for those offered any choice (findings not shown). This suggests that the growth of managed care plans is not solely the result of employers forcing their workers into HMO plans by offering only HMOs, but also by employees seeking to save on out-of-pocket costs by enrolling in lower-cost HMOs. But while choice of plans through employers may lead to more switching to HMO plans, persons choosing from plans in the nongroup market are more likely to disenroll from HMOs and less likely to switch to HMOs than are persons who obtain their insurance through employers. It is not clear why. However, any financial incentives that employers offer their employees to enroll and stay in an HMO would not be available to those in the nongroup market. Also, fewer HMOs offer nongroup policies, and if HMOs in the nongroup market are less stable or of lower quality than those in the group market, negative experiences with these plans could lead to more disenrollment. 10 n Is plan switching more common in areas dominated by managed care? The growth of managed care in a particular area is often accompanied by increased turmoil and competition in the health insurance mar-

4 EXHIBIT 2 Characteristics Of Persons Who Changed Health Plans, All 16.8% 25.6% 40.2% Age Sex Male Female Race/ethnicity White Black Hispanic Other Health status Excellent Very good Good Fair or poor Education High school or less Some college College graduate Family insurance Less than 200% of poverty % of poverty % of poverty 400% of poverty and higher Source of insurance e Employer Other Employer offerings e One plan More than one plan HMO/POS penetration in the site f Less than 20% 20 39% 40% and higher d d 11.4 d d 13.0 d d 13.3 d d 20.5 d d 16.8 d d d d d d d 52.5 d d 19.5 d d SOURCE: Community Tracking Study (CTS) household survey. NOTES: HMO is health maintenance organization. POS is point-of-service. a Sample includes only persons continuously insured through private coverage. b Sample includes plan changers who started out in HMO plans. c Sample include plan changers who started out in non-hmo plans. d Difference with comparison group is statistically significant at the.05 level. Comparison groups are age 35 44, male, white, excellent health, high school education or less, below 200 percent of poverty, nonemployer insurance, one employer plan offered, and less than 20 percent HMO/POS penetration. e Refers to the plan/employer on the day of the interview. f Computed from the Robert Wood Johnson Foundation Employer Survey for each of the sixty CTS communities. Refers to the percentage of workers in the site enrolled in HMO/POS plans. 161 H E A L T H A F F A I R S ~ M a y / J u n e

5 162 ket attributable in part to more-aggressive price shopping for health insurance by employers which results in some plans merging, others leaving the market entirely, or new plans entering the market. One would expect that the main impact of this activity on consumers would be an increased frequency of health plan changes. However, we found that the rate of plan changing is only slightly higher in areas with moderate or high HMO and point-of-service (POS) plan penetration compared with areas with low penetration. 11 Thus, to the extent that heavy managed care activity is associated with greater turmoil in the health insurance market (which we cannot measure directly), the impact on consumers appears to be fairly small. As one would expect, persons in areas with high HMO/POS penetration who change plans are more likely than are persons in areas with low penetration to switch to HMO plans, while low-penetration areas experience higher rates of disenrollment from HMOs. The comparable rates of switching to HMO and non-hmo plans in low-penetration markets (34.8 percent and 33.6 percent, respectively) suggests that overall HMO/POS penetration in these markets is not increasing. However, the higher rate of switching to HMO plans (compared with non-hmo switching) in areas with moderate penetration (20 40 percent) suggests that these areas will eventually change to high-penetration areas. The much higher rate of switching to HMO plans in high-penetration areas suggests that HMOs will become even more dominant in these areas. n How often does plan changing result in a change in providers? Persons who changed health plans were twice as likely as persons who did not change plans were to change the place where they usually receive medical care (Exhibit 3). In addition, a change in the usual source of care was found to be higher for persons switching between HMO plans or into or out of an HMO compared with persons who were switching between non-hmo plans. This is consistent with the fact that non-hmo plans include traditional indemnity plans which typically do not use defined provider networks as well as preferred provider organizations (PPOs) whose provider networks tend to be larger and less exclusive than those of HMOs. For these same reasons, however, it is somewhat surprising that the rate of changing providers is still relatively low (less than 30 percent), even when the plan change involves an HMO. That most plan changers maintain their usual source of care suggests consider- EXHI BIT 3 Percent age Of Privately Insured Persons Who Changed Their Usual Source Of Care, All privately insured persons Persons who did not change plans Persons who changed plans Changed from non-hmo to HMO 22.5 a 22.0 a Changed from HMO to non-hmo 25.3 a Changed from HMO to HMO 28.6 a Change from non-hmo to non-hmo 16.6 a SOURCE: Community Tracking Study household survey. NOTE: HMO is health maintenance organization. a Difference with persons who did not change plans is statistically significant at the.05 level. 5

6 able overlap between provider networks, which is more common in the network or independent practice association (IPA) model of HMO. Alternatively, some may exercise plan options to pay higher copayments for going outside the network (as with PPOs and POS plans) or pay the full costs of medical visits to keep seeing a physician with whom they have a long-standing relationship. Moreover, even among those who changed both their health plans and their usual source of care in the same year, only about half explicitly cited changes in their insurance as the reason for changing their usual source of care (Exhibit 4). The rest cited quality, the availability of their previous usual source of care, or other reasons. While changes in insurance may be indirectly related to some of these other reasons, these findings suggest that even fewer provider changes are directly associated with a change in health plans. It is important to note that these results do not allow us to determine whether or not the change in insurance actually caused the change in usual source of care (that is, whether the plan change occurred before or after the change in providers). With the almost universal use of provider networks by managed care plans, it also is possible that some consumers change plans to gain access to a provider in a different network. Discussion Two contradictory perspectives on the merits of plan changing have emerged. The consumer choice perspective holds that a change may allow consumers to obtain a plan that best suits their needs, and the resulting competition among health plans leads to both lower costs and higher quality. The key assumption behind this view is that health plan switching reflects consumers choice. Another perspective stresses that health plan switching can lead to a change in physicians, thus disrupting the patient/provider relationship and continuity of care. A key assumption behind this view is that consumers actual choices are limited, and hence most plan changes are involuntary. The results from this study suggest that consumer choice is directly involved in only about one-fourth of plan changes and that most changing is the result of a job change or a change in employers plan offerings. On the other hand, consumer choice appears to play a somewhat larger role in switching to HMOs. While this may in part reflect the fact that some consumers cannot afford other options, we did not find a significantly higher rate of switching to HMO plans among low-income persons. Rather than strictly being an issue of affordability, a desire for lower health care costs is something that consumers value, and most have expressed a willingness to accept some restrictions on their care to save on costs. 12 Although we could not examine how plan changes directly affected health care access, use, or perceived quality, it appears that major disruptions in care through a change in providers does not occur as often as one might expect, although some plan changers might incur higher out-of-pocket costs in order to keep seeing the same physician. In fact, when we consider all persons who had private insurance throughout the survey year, no more 163 EXHIBIT 4 Reasons For Changing The Usual Source Of Care, Reasons for changing usual source a Percent related to insurance Percent related to quality Percent USC no longer available Percent other reason 53.2% b 17.0 b 7.6 b 22.3 b 17.7% SOURCE: Community Tracking Study household survey. a Includes only persons reporting a change in usual source of care. b Difference with persons who did not change plans is statistically significant at the.05 level. H E A L T H A F F A I R S ~ M a y / J u n e

7 164 than about 2 percent were forced to change providers as a result of some change in their insurance. 13 Furthermore, it is likely that forced changes in providers resulting from plan changes will decrease even further, given the fact that various patients bills of rights are designed to increase access to physicians and that many managed care plans on their own have been moving toward more open provider networks since the time of the survey. On the other hand, a return to high annual increases in health insurance premiums may lead to even greater demand among employers and consumers for lower-cost plans, thereby increasing the rate of plan switching. Future rounds of the CTS will allow for an examination of changes in the rate of plan switching among privately insured persons, to provide further insight into how changing health plans affects people s experiences with the health care system. The views in this paper reflect those of the authors, and no approval or endorsement by the Institute of Medicine or National Academy of Sciences should be inferred. The Center for Studying Health System Change is supported in full by the Robert Wood Johnson Foundation. The authors thank Paul Ginsburg and Peter Kemper for reviewing a previous version of this manuscript, Ha Tu for analytic assistance, and Beny Wu of Social and Scientific Systems for programming assistance. A previous version of this manuscript was presented at the annual meeting of the Association for Health Services Research, Chicago, June NOTES 1. S.A. Flocke et al., The Impact of Insurance Type and Forced Discontinuity on the Delivery of Primary Care, Journal of Family Practice (August 1997): ; and H.R. Burstin et al., The Effect of Change of Health Insurance on Access to Care, Inquiry (Winter 1999): T.C. Buchmueller and P.J. Feldstein, Consumers Sensitivity to Health Plan Premiums: Evidence from a Natural Experiment in California, Health Affairs (Spring ): ; and S.H. Long et al., Employee Premiums, Availability of Alternative Plans, and HMO Disenrollment, Medical Care 26, no. 10 (1988): See P. Kemper et al., The Design of the Community Tracking Study: A Longitudinal Study of Health System Change and Its Effects on People, Inquiry 33, no. 2 (1996): See R. Strouse et al., Report on Survey Methods for the Community Tracking Study s Round 1 Household Survey (Princeton, N.J.: Mathematica Policy Research, 1998). 5. All estimates were weighted to be representative of the civilian noninstitutionalized population of the continental United States. Standard errors used in tests of statistical significance take into account the complex survey design, including the clustering of the sample in the sixty sites, the inclusion of multiple families within a household, sampling multiple adults within families, and the random selection of one child. 6. S. Strude, Who Has a Choice of Health Plans? Center for Studying Health System Change Issue Brief no. 27 (Washington: HSC, 2000). 7. While all of the discussion of the results in Exhibit 2 are based on descriptive analyses, logistic regression analyses were also conducted for the likelihood of having any changes of plans, as well as the likelihood of switching to a different plan type (for those who changed plans). All of the row variables in Exhibit 2 were included as independent variables. All of the differences in Exhibit 2 that are discussed in the text were confirmed by the multivariate analyses. 8. H. Tu and P. Cunningham, Strong Opinions Held about the Tradeoff between Choice of Providers and Cost of Care, Center for Studying Health System Change Data Bulletin no. 4 (Washington: HSC, 1997). 9. The employer offerings of the policyholder are used in determining whether or not an individual has a choice of plans. That is, all persons in the family covered by the plan are assigned the same value for the employer offerings variable as that of the policyholder of the plan. Persons with nongroup private insurance or other private insurance are excluded from the analysis. 10. D.J. Chollet and A.M. Kirk, Understanding Individual Health Insurance Markets: Structure, Practices, and Products in Ten States (Washington: Alpha Center, March 1998). 11. HMO/POS penetration in each of the sixty communities was derived from the 1997 RWJF Employer Survey, which also allows representative estimates for each of the sixty CTS communities. The measure refers to the percentage of workers in the site who are enrolled in HMO or POS plans. 12. Tu and Cunningham, Strong Opinions. 13. Based on combining the rate of plan changing among privately insured persons (17 percent) with the percentage of plan changers who also changed their usual source of care (22 percent), with the percentage of persons who changed both their plan and usual source of care and who cited insurance as the main reason for changing their usual source of care (53 percent).