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Higher Co-Pays Save Money Now, Cost More Later?

Nowadays, more companies are moving towards offering group health insurance plans with higher co-payments and deductibles. The idea behind such a move is that it saves the firm money by encouraging its employees to take better care of their health. Passing a higher percentage of health insurance costs onto the consumer should make him or her think twice before neglecting their health and waiting for their health insurance plan to deal with it. Unfortunately, evidence from Medicare patients seems to suggest that this strategy can backfire.

It turns out that the patients who saw their co-payments rise actually cost their health insurance plans more in the long run. How is that possible? While they did make fewer outpatient visits, that savings was offset by the increase in hospitalizations and in-patient treatment days. Hospital stays cost health insurance companies more than healthy patients who use regular preventative care services. Higher co-payments discourage patients from visiting doctors and having any illnesses treated earlier and cheaper. It is possible that these findings may also apply to individual health insurance plans.

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