As employers attempt to contain health insurance costs, workers and families struggle too

Joseph Burns

About Joseph Burns

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at joseph@healthjournalism.org.

Photo: Pictures of Money via Flickr

One of the largest and most important parts of our health care system is the role employers play in providing health insurance coverage for workers, retirees, and family members. U.S. employers cover 55.1% of Americans who have health insurance, according to a report released by the U.S. Census Bureau.

By providing health insurance for more than half of all Americans, employers pay for the biggest share of health coverage in the United States. (We should note that, on average, families paid just more than a third of what employers cover, according to a report from the Kaiser Family Foundation). Medicare, Medicaid and the Veterans Administration cover 34.4%; TriCare covers 2.6%; and Americans who buy their coverage directly from health insurers account for less than 11% of the population, the Census Bureau report shows. In the same report, the bureau showed that 8.5% of Americans were uninsured last year. (The numbers don’t add up to 100% because people can have more than one type of coverage.)

The problem for employers is that their health insurance costs keep rising steadily and quickly, according to the KFF report, “2019 Employer Health Benefits Survey.” Before it released the report on Sept. 25, KFF released an analysis that looked at both premiums and other out-of-pocket costs shows. The analysis showed that families with coverage through a large employer paid 67% more for their health benefits and care in 2018 than they paid a decade earlier.

The most alarming part of the analysis was that over those same 10 years, the share that families with employer-provided insurance paid directly for health insurance (meaning premiums, coinsurance, copayments and deductibles) rose faster than their wages rose (which increased by 31% over the decade), and faster than inflation (which rose by 21% over same period), KFF reported.

As KFF showed, health insurance costs rose twice as fast as employees’ wages and three times as fast as inflation. In other words, health insurance costs are contributing to the financial toxicity that Americans experience as they struggle to pay for health insurance and health care.

Last year, a typical family of four with employer-provided insurance paid $7,726 as the combination of their share of health insurance premiums (which families usually pay through payroll deductions) and copayments, coinsurance, and deductibles (which families pay as they use health care services over the year), the report showed. Premiums alone for such families cost $4,706; while coinsurance, copayments and deductibles totaled $3,020 last year, KFF said in its annual report.

By the way, the $7,726 that a typical family of four with employer-sponsored insurance (sometimes called ESI) paid this year is 35% of what employers paid, which is $20,576.

The rising costs was covered widely, but there’s a better story behind the headlines. See, for example, how Michelle Andrews covered the issue for Kaiser Health News. While health insurance premiums and deductibles for job-based coverage edged upward, the results were uneven because many workers least able to afford it were had higher-than-average costs, she wrote. “People at companies with large numbers of lower-wage employees faced bigger deductibles for single coverage and were asked to pony up a larger share of their incomes to pay premiums than those at firms with fewer people with low earnings,” Andrews explained.

For her article for The New York Times, Reed Abelson took a similar approach. The headline on her story summed up the situation well: “Employer Health Insurance Is Increasingly Unaffordable, Study Finds.” A relentless rise in premiums and deductibles has caused many workers, especially those with low incomes, to struggle financially, she reported.

“Employers remain the main source of health insurance in the United States, covering about 153 million people,” she wrote. “But premiums and deductibles are pushing employer-based coverage increasingly out of reach.”

Abelson started her article with the story of a woman in Washington, D.C., who quit her job at a nonprofit because she couldn’t afford to pay for her share of her employer’s health insurance plan. She had a chance to go from working part time to full time but, because she has a heart condition, becoming a full-time worker would have caused her monthly out-of-pocket costs to rise to $1,200, Abelson wrote.

“Instead, she quit her job last summer so her income would be low enough to enroll in Medicaid, which will cover all her medical expenses,” Abelson explained.

Clearly Abelson found a stunningly good example of someone so squeezed by rising health insurance costs that she felt compelled to quit her job. But given that health insurance is prohibitively expensive for many small businesses, it may be possible to find other such sources or at least to get the employer’s view of rising insurance costs.

In her article, Abelson quoted KFF’s CEO Drew Altman, who said, “For some reason, we like to focus on coverage when the issue for workers, people and the public generally is cost.”

The cost angle is particularly important, given that the candidates in the Democratic presidential primary have promoted the advantages of Medicare for all. The angle to Medicare for all that doesn’t get much coverage is the difference between the well-paid and mostly fully covered employees who may be reluctant to give up their employer-sponsored health insurance, and those with low wages and high out-of-pocket costs who might support Medicare for all.

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