IU study: Indiana stands out for reliance on self-insured, high-deductible plans

By Whitney Downard, Indiana Capital Chronicle

New data from an Indiana University analysis suggests that aggregate health care spending in the state is on par with that of peers in other states, but that Hoosiers are more likely to be in a high-deductible plan or covered under a self-insured plan.

Such arrangements could be one of the factors that make Indiana's health care prices more expensive than in neighboring states, according to Aparna Soni, a health economics professor with IU's Richard M. Fairbanks School of Public Health.

"Health care is complicated, as we all know. And there are just so many pieces of the puzzle. We found in our dialogues with stakeholders that, oftentimes, people focus on kind of one piece of the health care puzzle," said Soni, one of the study's three authors. "We feel that health care costs, or something as complex as health care costs, are best understood when we look at the big picture."

However, initial lawmaker reaction in late October was mixed, with some legislators questioning the study's aim and members of the group funding the study.

"Cost is important; total cost is important. But this still does not change the fact that we do have higher prices in the state," said Rep. Donna Schaibley, R-Carmel.

The October review of 80 factors of Indiana's system functions as an update to a 2020 study from the same school and was commissioned ahead of the 2025 legislative session by the Indiana Business Health Collaborative, or IBHC.

The group includes heavy hitters from past sessions, such as the Indiana Hospital Association, Eli Lilly and Co., Cummins Inc., the Indiana State Medical Association and most of Indiana's higher education institutions.

"Indiana is a conservative state. Typically, you don't see bigger government as the answer to any challenge, and we need to be data-driven and cautious in the push for reform. We don't want to accidentally make things worse in an effort to make things better," IBHC Chief Executive Luke Messer said.

Previously, Messer was elected to the 6th Congressional District after serving in the Indiana House of Representatives—lending him insight into how lawmakers can use the new findings next year.

"I think you'll see a push for even greater transparency. … I think that's important for both policymakers and consumers," Messer continued.

Key takeaways

Per-capita health spending in the Hoosier state, which includes hospitals, physician services and drug purchasing, is "nearly identical" to the average spending, with Hoosiers spending roughly 10.7% of their median income on health care compared to the national average of 11.6%. That figure fell 7% statewide since the 2020 report, while the national average decreased slightly less than a percentage point.

But Hoosiers are 20% more likely to be covered by a self-insured health plan than are their peers, a type of plan that "lacks the market power to effectively negotiate prices with hospitals," the study noted.

"… the dominance of self-insurance in Indiana may partially explain previous findings that hospital prices are higher in Indiana than other U.S. states," the authors concluded.

Two-thirds of private-sector employees in Indiana are enrolled in self-insured plans, compared with 55% of Americans. Indiana's number is likely an undercount since many public institutions also have self-insured plans but weren't included in the study.

Relying on such a plan, in which employers assume the financial risk and responsibilities for their employees' medical costs, is decreasing nationwide while Hoosier business use is increasing—though the study doesn't theorize why. Additionally, federal law prohibits the state from regulating self-insured plans.

Negotiating prices is handled by a third-party administrator, usually an insurance company, that doesn't have the same incentive to pursue lower prices.

"The employer would really benefit from lower prices and less spending. But the insurance company—in this case—they wouldn't really experience that benefit," Soni summarized. "We typically see higher prices than we would for the same services in fully insured markets."

This same pool of Hoosiers isn't required to participate in the state's All Payers Claims Database, a state effort to provide transparency on hospital prices for services.

Additionally, 64% of Hoosiers are enrolled in a high-deductible health plan, up nearly 23% from 2020, compared with 54% of the nation.

The contents of the October study also appeared to refute some earlier reports of high insurance, hospital and health system monopolization in the state. Instead, authors report that "Indiana's health care markets do not appear to have a unique monopoly problem."

Still, the state has its struggles. Hoosiers have a higher mortality rate, higher rates of negative health factors—such as cigarette use and chronic illnesses—and a lower number of physicians than the national average.

"We simply don't have enough health care professionals to keep folks healthy," Messer summarized.

How to use the data in 2025

In late October, both Messer and Soni presented the findings before the Health Care Cost Oversight Task Force as part of a three-hour meeting that concluded with a final report.

On the good-news side, Indiana leads with one of the lower uninsured rates in the nation, but the overall health system hasn't incorporated value-based payments like other areas have.

"Value-based care is a system where health care providers—doctors, nurses—are rewarded based on the quality of care that they give to patients," Soni told the Indiana Capital Chronicle.

In contrast, something like fee-for-service might incentivize a provider to order more tests or see more patients in order to get a higher volume of reimbursements. Coordination of services under a value-based system would be overseen by an accountable care organization, a type of entity established by Medicare but now used by private health plans in some states.

Indiana has 20 such accountable care organizations, while the average state has 37. Illinois, Michigan and Ohio all have more than 50 accountable care organizations operating within their borders.

But Messer noted that not every difference between Indiana and its peers should be seen as a negative.

"Many of us think average consumers should have some skin in the game, and so if there's higher out-of-pocket costs for that—that's not necessarily negative," Messer said. "We may, as a community, ask, 'How can we make those high-deductible plans more effective?'"

Still, Republican Sen. Chris Garten, of Charlestown, was critical, especially about Messer's collaboration with the nonprofit hospitals currently at the center of high-price discussions.

"Oddly enough, a lot of your members that funded this study that suggests there's no market concentration issues in Indiana fought against the mergers and acquisition notification bill," Garten said. "They went all in trying to burn that bill down. And so, to that point … I can't help but draw the conclusion that we have members of this organization that funded a study that suggested there's no market concentration issues, and that's the only study I've seen to suggest that … ."

Chair Rep. Brad Barrett, for his part, recapped several years' worth of data and analysis—oftentimes conflicting—as being "clear as mud."

"Every day, we are presented with data that we have the ability—the responsibility—to sift through and use the expertise in this room to help come to conclusions and develop legislation and kind of unwind this big bowl of spaghetti," the Richmond lawmaker said.

The Indiana Capital Chronicle is an independent, nonprofit news organization that covers state government, policy and elections.

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