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How People React to High Iowa Medical Insurance Prices

As Iowans pay more, sometimes dramatically more, for health insurance, they make sacrifices to maintain their coverage and spend less in other areas of their lives. Many of these sacrifices involve behavioral changes that limit access to health care among those who are currently insured. Results from the 2005 Survey of Iowa Consumers show that some insured Iowans are responding to increasing health care cost pressures by taking the initiative to delay care or to consume fewer health care resources altogether. This includes such decisions as whether or not to seek or follow a physician's advice to undergo a diagnostic procedure or to begin or complete a course of treatment. These choices and others Iowans are making in response to cost pressures effectively downgrade the efficacy of the health care that professionals dispense to their patients. In short, insured Iowans are responding to increased costs in ways that are similar to the cost-saving strategies used by uninsured persons, such as a delay in seeking medical care when ill, not following through on recommended treatments, and taking on more personal debt when they have no choice but to seek medical assistance.

In fact, Iowans who rate their health insurance policy as no more than barely adequate are more likely to act against medical advice due to cost pressures than are the uninsured. The result is increased individual medical vulnerability and augmented societal costs in responding to the consequences of delayed medical care. What insured Iowans are not doing is voluntarily giving up health insurance as coverage rates have remained steady despite increasing premium costs.

The 2004 Iowa HRSA State Planning Grant Business Survey project showed that Iowa businesses responded to increasing health insurance costs in ways that, over time, threaten business viability, and possibly reduce the strength of the Iowa economy. A major theme in the 2004 study was the conflict between businesses absorbing rising health costs or passing costs onto employees. While the summer 2004 study showed few businesses had reacted by burdening employees (25% required employees to pay more in premium than in the past), the study also predicted an increasing shift of cost from employer to employee, with 58% of Iowa businesses saying they would require employees to pay more of their premiums if costs continued to rise.

This project traces the influence of health insurance cost on a multitude of individual and family life choices. The data show that health insurance currently exerts influence beyond matters of health and health care financing, and into Iowans' family decision-making, including when and if to get married or to start a family. Beyond its influence on the family, the need to maintain health insurance impacts job choice and mobility, workforce entry and exit (retirement), and even dampens the entrepreneurial spirit of some Iowans. Iowans believe health insurance's influence on their personal decision-making will be even stronger in the future.

Looking at the impact of rising health care costs beyond the individual and family level, an economic analysis of the survey data shows that high rates of health care cost increases are likely to have an impact on the regional economy. However, the expected negative effects of increasing health costs and the resulting net wage reductions are most likely offset by gains to the regional economy from growth in the health sector. At the sub-regional level, especially in small sub-regional economies, such as rural areas, the news is not so good. This is because higher health care costs have the effect of reducing health care consumption, and beyond some threshold, reduced consumption of health care is likely to translate into negative health outcomes. So while the net economic effects of economic activity moving from non-health care spending to health care spending may be offsetting in the short run, they are not likely to last in the long run, as small sub-regional economies experience net losses in economic activity. Similarly, the effects of reductions in health care consumption are likely to be greater for sicker, low-income populations, where the marginal health effects of small reductions in health care consumption may be large.