By Sara R. Collins, David C. Radley, and Jesse C. Baumgartner
The Commonwealth Fund, November 21, 2019
Issue: With 2020 elections coming up, some Democratic presidential candidates and members of Congress have suggested ways to reduce costs of insurance and care, including proposals for employer plans, which cover roughly half the population of the United States.
Goal: Examine trends in employer coverage over the past decade to determine how much workers are spending on premiums and deductibles and compare costs to median household income in each state.
Methods: Data from the Medical Expenditure Panel Survey–Insurance Component (MEPS–IC), which surveyed more than 40,000 private-sector employers in 2018 on their health insurance plans.
Key Findings and Conclusions: Average annual growth in the combined cost of employees’ contributions to premiums and deductibles outpaced growth in U.S. median income between 2008 and 2018 in every state. Middle-income workers spent an average 6.8 percent of income on employer premium contributions in 2018; per-person deductibles across single and family plans amounted to 4.7 percent of median income. Recent proposals would enhance the affordability and cost protection of Affordable Care Act marketplace plans, allow people with employer plans to buy coverage on the marketplaces, or replace private insurance with a public plan like Medicare.
Conclusions and Policy Implications
For U.S. families, the growth in employer health insurance costs has outpaced average growth in median income over the past decade. In addition, as costs have climbed, families haven’t received higher-quality insurance. In 18 states, the average health plan deductible is now 5 percent or more of income, meeting the threshold for underinsurance. While this study only considered families with middle incomes, lower-income families with employer coverage devote an even larger share of their income to health insurance and related costs.
People across the United States are not experiencing health care costs equally. Worker cost burdens are driven by four factors: the size of the overall premium, the share that employees contribute to those premiums, the size of their deductibles, and their income. In Mississippi, for example, people could spend more than 16 percent of their incomes on premiums and meeting deductibles, compared to an average cost burden of 8.4 percent in Massachusetts. In Mississippi, combined premiums and deductibles are higher than those in Massachusetts and Mississippi has the second-lowest median income in the country ($47,800). In contrast, median income in Massachusetts is among the nation’s highest ($81,913).
Higher costs for insurance and health care have consequences. People with low and moderate incomes may decide to go without insurance if it competes with other critical living expenses like housing and food, which consumed 36 percent of average family income in 2018. Research indicates that high deductibles lead people to delay or skip needed health care and prescription medications.
The Affordable Care Act (ACA) provides some cost protection to people with employer coverage. First, people with low incomes — less than 138 percent of poverty (or just under $17,000 for an individual) — are eligible for Medicaid in the 33 states, as well as D.C., which have expanded eligibility under the ACA. This is true regardless of whether or not they are offered a plan through their job. People enrolled in Medicaid pay no premiums or very limited premiums and face low or no cost-sharing. Second, people with employer premium expenses that exceed 9.86 percent of their income are eligible for marketplace subsidies, which trigger a federal tax penalty for their employers. This penalty is also triggered if the actuarial value of their plan is less than 60 percent (i.e., covers less than 60% of their costs on average). There’s a catch: these provisions only apply to single-person policies, leaving many middle-income families caught in the so-called family coverage glitch, where they have an expensive family plan but do not qualify for marketplace subsidies. The data in this report show that the average employee contribution to a family plan is 10 percent or more of median income in nine states.
What is the right level of premiums and cost-sharing for Americans? The ACA set standards for the marketplaces: required premium contributions for marketplace plans begin at 2.08 percent of income at the poverty level ($12,140 for an individual and $25,100 for a family of four) and rise to 9.86 percent for people at 300 percent to 400 percent of poverty ($36,420 to 48,560 for an individual and $75,300 to $100,400 for a family of four). The law also set standards for the benefits plans must cover and the amount that patients pay providers when they use their plans, with subsidies for people with lower incomes.
Congress could extend these marketplace requirements to employer plans or allow all people with employer plans to buy coverage in the marketplaces. But are the marketplace premiums and cost-sharing subsidies set at affordable levels for people across the income scale? Survey research indicates that many people, especially those with incomes just over the threshold for premium subsidies and cost-sharing reductions, may struggle to afford their premiums and deductibles.
Several Democratic members of Congress and presidential candidates have proposed enhancing the marketplace premium and cost-sharing subsidies and extending them further up the income scale. Others also would give people in employer plans the option of enrolling in a public plan offered through the marketplaces. Other members and candidates have suggested eliminating all private insurance and replacing it with a public plan like Medicare, and ending or reducing premiums and cost-sharing. Republican health reform ideas tend to favor replacing the ACA with market-oriented approaches that give states more discretion over insurance markets and the Medicaid program. We are certain to hear from voters on this issue in the coming year.
By Don McCanne, M.D.
In spite of the Affordable Care Act, “For U.S. families, the growth in employer health insurance costs has outpaced average growth in median income over the past decade.”
Something needs to be done. On “policy implications” this article suggests expanding the provisions of the Affordable Care Act and perhaps adding a public option to the marketplaces. Such an approach would perpetuate much of the deficiencies and injustices of our current system of financing health care.
There is one sentence buried in the last paragraph that describes an approach that would correct most of the deficiencies in our health care financing system: “Other members and candidates have suggested eliminating all private insurance and replacing it with a public plan like Medicare, and ending or reducing premiums and cost-sharing.”
It is unfortunate that The Commonwealth Fund along with other organizations and media sources seem to have delegated this approach to a category of “aspiration” which can be dismissed because of a supposed lack of political feasibility.
Our task? Change the perception about political feasibility. Take to the streets if we have to.
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