A report released today by the Center for Healthcare Research & Transformation (CHRT) shows that individuals selecting health coverage in Michigan are making their buying decision based on costs more than choice of physicians and network size.

The report, “Health Plan Selection: Factors Influencing Michiganders’ Choice of Health Insurance,” shows that consumers purchasing individual health insurance coverage were more than twice as likely to report that premium cost was very important in selecting a health plan as they were to report that the number of in-network physicians was a very important factor in their decision.

“We have known from consumer behavior that cost is very important, particularly when consumers are choosing and paying for health plans themselves. But, this study tells us more clearly just how much more important cost is in today’s marketplace than network size,” says Marianne Udow-Phillips, director of CHRT.

Highlights of report include:

• 92 percent of respondents with individually purchased insurance reported that at least one cost measure (premium, deductible, co-pay or co-insurance) had been a very important factor in their selection of a health plan.
• 41 percent of those with individually purchased health insurance—less than those with employer-sponsored insurance (50 percent)—noted that the physician network was a very important factor in their decision-making.
• Nearly 20 percent of those with individual coverage changed primary care physicians as a result of their choice of plans.

In 2014, the first open enrollment for individual coverage, more than 272,000 Michigan residents enrolled in individual health coverage, choosing from 60 non-catastrophic plans. In most cases, consumers had a wide choice of plans representing different provider networks and levels of cost sharing.

“The fact that consumers in the individual marketplace are willing to change their primary care physician relationship based on price and select a health plan with a narrow provider network with lower costs is significant,” says Udow-Phillips. “Providers of care will want to pay close attention to these results as they think about which health plan products to participate in.”

In a separate CHRT survey, Michigan’s primary care physicians reported having capacity to see new patients, making them more willing to accept Medicaid patients and more likely to consider joining networks with lower negotiated payments in order to gain access to more patients.

The CHRT analysis has important insights for providers, payers and employers alike, says Udow-Phillips, who is a member of the U-M Institute for Healthcare Policy and Innovation and holds a faculty appointment in the U-M School of Public Health.

“For providers, consumer loyalty may not be as strong a factor in keeping patients as it once was, as they are more willing to shift providers for lower price. For employers, they may be able to offer more narrow-network plans, as consumers are more accepting of less choice in exchange for lower premiums, deductibles and out of pocket costs. For insurers, plan design and the ability to develop narrow quality networks are essential.”

CHRT’s analysis is based on results from a series of questions CHRT added to the Michigan State University Institute for Public Policy and Social Research (IPPSR) quarterly State of the State Survey conducted via landline and cell phones between September and November 2014. The margin of error for the sample of 1,002 Michigan adults was ±3.9 percent. The IPPSR State of the State Survey methodology can be found at: http//ippsr.msu.edu/soss/.

This survey brief is a part of the Cover Michigan Survey 2014 series. Future briefs will cover other aspects of health care in Michigan using the 2014 survey data. Read the full report, “Health Plan Selection: Factors Influencing Michiganders’ Choice of Health Insurance,” at chrt.test.

A report released today by the Center for Healthcare Research & Transformation (CHRT) shows substantial variation in hospital costs between Indiana, Michigan and Wisconsin, with Michigan as the lowest cost among the three states. Many complex factors contributed to these differences, and likely included state regulations such as Certificate of Need laws and health insurance market conditions that varied by state.

Major findings are that in fiscal year (FY) 2013, Wisconsin had per capita hospital costs of $3,107, higher than Indiana ($2,975) and Michigan ($2,624). This is consistent with earlier trends in total health care spending per capita. From 2001 to 2009, Wisconsin had the highest per capita health care costs among the three states, while Michigan had the lowest.

These three states were chosen for study as Midwestern states with diverse health care policies and market conditions. The report analyzed hospital costs at the state level and hospital profit margins in the largest city in each state—Detroit, Indianapolis and Milwaukee.

“Differences in the states’ health insurance markets, and Certificate of Need laws that regulate hospital construction and investment in technology are likely two factors contributing to the variation we see between hospital costs in these cities,” says Marianne Udow-Phillips, director of CHRT.

“Wisconsin has the most fragmented health insurance market in the nation, likely reducing the bargaining power of any one insurer. Wisconsin and Indiana have no Certificate of Need laws, while Michigan is one of 36 states that does,” says Udow-Phillips.

Other highlights of CHRT’s issue brief, A Tale of Three Cities: Hospital and Health System Costs in the Midwest, show that:

• In FY2013, there was substantial variation in hospital and health system profit margins among the three cities. The Milwaukee health systems had the highest operating margins in the study, ranging from 4.1 to 12.2 percent, far above the national benchmark of 2.2 percent. Total margins ranged from 6.6 to 15.2 percent, compared to a benchmark of 4.2 percent.
• The Indianapolis health systems generally had operating and total margins above the benchmarks as well. Operating margins ranged from -0.2 percent to 10.6 percent, and total margins ranged from 15.6 to 17.4 percent.
• In contrast, most of the Detroit hospitals and health systems had margins below the national benchmarks. Operating margins ranged from -9.4 percent to 4.1 percent, and total margins ranged from -0.8 percent to 5.8 percent.

“This study illuminates the cost trend differences of communities in neighboring states with varying market and regulatory structures. Policy makers can further analyze these cost trend differences to inform future health care spending and regulatory policies,” says Udow-Phillips, who is a member of the U-M Institute for Healthcare Policy and Innovation and holds a faculty appointment in the U-M School of Public Health.

The CHRT analysis is based on financial data from FY2013 Medicare Cost Reports accessed through the American Hospital Directory to calculate operating and total profit margins, as well as per capita hospital spending by state. Medicare Cost Reports are the only national data source available for all types of hospitals, regardless of whether they are for-profit, not-for-profit, or government facilities.

For a comparison of health care costs in Indiana, Michigan and Wisconsin, please read “A Tale of Three Cities: Hospital and Health System Costs in the Midwest,” available at chrt.test.