- Middle-income families spend 11 percent of their annual incomes on out-of-pocket healthcare costs and insurance premiums and deductibles, according to a recent report from the Commonwealth Fund.
Using data from the federal Medical Expenditure Panel Survey – Insurance Component (MEPS – IC), the researchers looked at non-elderly adults with employer-sponsored healthcare. Nearly half of the country receives their payer coverage from their employer, making it a critical research area, the Commonwealth Fund researchers said.
Spending on insurance premiums for employer-sponsored plans remained steady and modest between 2011 and 2016, the report found. However, between 2016 and 2017 premiums for middle-income families saw a significant spike. Annual single-person premiums rose to $7,000 and family premiums rose to $20,000.
As such, employer premiums (meaning the premium an individual actually pays to her employer for her coverage) also increased. Employer premiums totaled to as little as $675 in Hawaii to $1,747 in Massachusetts for single plans.
Family plans ranged from $3,646 in Michigan to $6,533 in Delaware for employer premiums.
These premium contributions for single and family plans accounted for 6.9 percent of worker wages in 2017. This is up from 5.1 percent in 2008. There were 11 states in which premiums accounted for up to 8 percent of worker wages.
The patient costs do not end with premiums. Employees are increasingly enrolling in high-deductible health plans, which come with high out-of-pocket costs. The average deductible in a single plan was $1,808 in 2017. This means the beneficiary was responsible for over $1,800 in out-of-pocket costs for certain services before insurance kicked in.
Average deductibles accounted for 4.8 percent of employee wages in 2017, up 2.7 percent in 2008.
When all was said and done, employees were responsible for up to $7,240 in 2017. This included premium costs and potential out-of-pocket patient spending for both family and single plans, the report noted.
In some states, patient spending could reach up to $8,000 annually. This totaled to just over 11 percent of annual income, up 7.8 percent from the previous decade.
There are numerous implications for these cost trends, the report stated.
The growth in cost of healthcare for families is outpacing the growth in wages, the Commonwealth Fund pointed out. And these high healthcare cost trends come as quality of care is not necessarily improving.
What’s more, this report only covered middle-income earners. This means that low-income families with employer-sponsored healthcare and presumably the same costs are shelling out a larger share of their incomes for healthcare. This could create an untenable financial situation for patients and providers alike.
“Higher costs for insurance and health care have implications. People with low and moderate incomes may simply decide to go without insurance if it competes with other critical living expenses like housing, food, and education,” the report authors explained.
High-deductible health plans may also discourage patients from accessing healthcare until symptoms become unmanageable – and exceptionally costly.
And when patients do access care with limited financial means, it could leave a hospital grappling with uncompensated care issues.
There are some legislative policies in place to protect patients, the report authors noted. For example, when employer premiums exceed 9.5 percent of an individual’s income, that individual becomes eligible for ACA market subsidies. That manifests itself as a tax penalty on the employer.
However, that provision only applies to individual plan beneficiaries, an issue known as the “family coverage glitch.” As noted above, the premium costs for a middle-income family exceeds 9.5 percent of a household income.
There are a few potential solutions to cap healthcare spending for middle-income families.
For example, Congress could repair the family coverage glitch.
Second, Congress could protect the cost and quality of employer-sponsored plans.
Third, Congress could increase the number of services that are covered by insurance before an individual meets their deductible.
Finally, employees could benefit from tax credits that could be applied to the purchase of their employer-sponsored health plan.
Additionally, the healthcare industry will need to address its inherent cost issue. While consumer protections could address high patient and family costs, the industry will also have to address the high raw cost of healthcare.
“Health care cost growth is the primary driver of premium growth across all health insurance markets,” the report authors said. “This means that income-related cost protections like these will need to be paired with systemwide efforts to slow medical spending.”
Addressing the high costs of healthcare, even for those with employer-sponsored insurance coverage, will be a pressing issue going forward, the report authors stated.
“Policymakers will need to recognize that the increasing economic strain of health care costs facing middle-income and poor Americans is driven by multiple interrelated factors and will require a comprehensive solution,” the report concluded.