Hoosiersapp out-of-pocket health care spending is higher than in neighboring states, and a new Indiana University analysis points to the prevalence of high-deductible health insurance plans as a possible contributing factor.
The study was commissioned ahead of the 2025 legislative session by the Indiana Business Health Collaborative, whose members include the Indiana Hospital Association, Eli Lilly, Cummins, the Indiana State Medical Association and most of the stateapps universities. Researchers gathered data on 80 different variables that might affect health care costs for Indiana, the four contiguous states and the U.S. overall.
appWhen we look at the aggregate health care spending, Indiana is actually right in the middle of the pack,app Aparna Soni, an associate professor at IUapps Richard M. Fairbanks School of Public Health and one of the studyapps authors, told app Wednesday. appHealth care spending in Indiana is around $10,500 per person each year, but itapps actually on the nose with the national average and our neighboring states.app
Wednesday, Gov.-elect Mike Braun said lowering health care costs will be his administrationapps top priority. Soni said knowing where and how Indiana differs from other states is a key component in identifying potential solutions to make health care more affordable.
Indianaapps per-capital health spending, which includes hospitals, doctor services and pharmaceutical purchasing, is appnearly identicalapp to the U.S. average, with Hoosiers spending about 10.7% of their median income on health care compared to the national average of 11.6%. The Indiana figure has fallen 7% statewide since 2020, while the U.S. average decreased by slightly less than a percentage point.
But Hoosiers are 20% more likely to be covered by a self-insured health plan than their peers, a type of plan that lacks appthe market power to effectively negotiate prices with hospitals,app the study said. Relying on such plans, in which employers assume the financial risk and responsibilities for their employeesapp health costs, is decreasing nationwide while Indiana businessesapp use is increasing.
Two-thirds of private sector employees in Indiana are enrolled in self-insured plans, compared to 54% of Americans. In self-insured plans, negotiating prices is pushed off onto a third-party administrator, usually a small insurance company that doesnappt have the same incentive to pursue lower prices.
appItapps a clear case of misaligned incentives,app Soni said. appEach party is acting rationally in their own self-interest, just as firms should. But as a result, the prices paid by self-insured plans are higher.app
Authors of the IU study didnappt address policy recommendations to reduce Hoosier health care costs. But if they were asked, Soni said the team would suggest focusing on areas where Indiana stands apart from the nation.
appHow can we address the negotiation imbalances in self-insured markets?app Soni asked. appEven though Hoosiers are themselves oftentimes selecting to be in these high-deductible health plans, how can we ensure that theyappre really making the right decisions for themselves?
appWe have a physician shortage issue in our state,app she continued, appespecially in the rural areas. We have really high burdens of chronic illness, such as diabetes and heart disease, and risky health behaviors. How can we focus our attention on preventing these kinds of chronic illnesses?app
Since 2020, state legislators have passed several laws to reduce health care costs, including enacting hospital price transparency requirements, and implementing the stateapps All Payer Claims Database for consumers to compare health care prices.
Soni and the IU reportapps co-authors note the stateapps recent $225 million public health investment, a 1,500% increase in statewide funding, is projected to improve overall health conditions significantly.
Lawmakers should be commended for those investments while curbing other health care spending, but more can be done. The findings of Indiana Universityapps health care study can help guide their work in the next session to further improve health care affordability, access and outcomes statewide.
