Withering on the Vine:

The Decline of Indemnity Health Insurance

September/October 2000
Health Affairs , vol.19, no.5 (September/October 2000): 152-157
Jon R. Gabel, Paul B. Ginsburg, Heidi H. Whitmore, Jeremy D. Pickreign

he percentage of American employees with indemnity insurance coverage declined from 95 percent in 1978 to 71 percent in 1988, then to 14 percent in 1998. This transition from unmanaged indemnity coverage to managed care has turned the economics of health care upside down: dramatic slowing of the rate of medical costs along with increased concern about restrictions on freedom to choose providers. A sample of 286 employers has demonstrated that 62 percent of the decline in indemnity coverage is due to employee choice, and 38 percent is because employers no longer offer such coverage. Midsize firms are the most likely to drop indemnity coverage, especially those without substantial numbers of high-wage earners. In firms that dropped indemnity coverage, 97 percent of employees had access to out-of-network coverage through a PPO or POS plan.

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