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Accountable Care News: June 2015, Thought Leaders’ Corner

Accountable Care News approached Dudley Morris, Senior Advisor with BDC Advisors, to discuss “Is a $50 consumer stay-in-network incentive payment enough

to influence consumer behavior?”

Dudley Morris commented: “There are numerous studies which show that consumers’ health plan choices are highly sensitive to the amount of out-of-pocket premiums — but not much on how they respond to stay-in-network bonuses. In general, the elasticity of demand varies with health care risk, with younger healthier patients being more sensitive to price. When the Massachusetts Commonwealth Care Program made a major shift in 2008 with respect to the pricing of the four Medicaid Managed Care Programs from which enrollees could receive their care, the data showed that individuals would switch to a cheaper plan for a little as $10 per month.

The fact that approximately 30% of the enrollees in the health insurance marketplaces switched plans between the first and second open enrollment periods indicates that healthcare consumers now shop for value in health plans the same way they do for car insurance or cell phone plans. Consumers have demonstrated that they are extremely sensitive to monthly out-of-pocket costs, and that a $10 monthly premium difference — just $120 a year — will make them switch plan. Whether a one-time $50 bonus will buy 12 months of loyalty — that’s less than $5 a month — is another matter. If that bonus were translated into a $5-$10 monthly premium rebate paid at the end of the year for staying in network, you would be more likely to see loyal customers.”


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