The report released in late August is based on responses from 147 large employers covering 15.6 million workers and their families. Employers indicated they expect no change in the percentage of costs they will cover, currently 70 percent, meaning workers can expect out-of-pocket costs of nearly $4,500. The open enrollment period for employer health care plans typically takes place in November.
An analysis in May by the Commonwealth Fund found 23.6 million Americans with employer plans were paying 10 percent or more out of their household paychecks for health care costs. The costs can range between $300 and $12,080, the report states.
Benefit or Burden?
The current predicament of rising cost-sharing and premiums has been a decade and a half in the making and can be traced back to policies enacted in the 1950s, says Devon Herrick, a health care economist and policy advisor to The Heartland Institute, which publishes Health Care News.
“In the early 1950s, Congress placed their imprimatur on the Internal Revenue Service’s earlier declaration for health insurance to be a fringe [nontaxable] benefit for employees,” said Herrick. “Really, that was a huge mistake.”
The ruling and subsequent statute have allowed employers to get a discount on what would otherwise be taxable wages, says Herrick.
“Over time, workers began getting more and more of their medical care tax-free,” said Herrick.
As a result, employers and employees have less incentive to shop for the best price when getting care, says Herrick.
“The more you disconnect workers from being able to decide whether a dollar of medical care is worth it, the more wasteful it becomes,” said Herrick.
Skin in the Game
This “sky is the limit” mentality eventually became too costly, and employers responded by offering insurance with higher deductibles, says Herrick.
“Since on average most employees don’t spend the $1,200 or $1,500 or whatever their deductibles are, they’re more price-conscious, and they’re more apt, in theory, to ask questions, like, ‘Do I really need that?’ ‘What’s that going to cost?’ or ‘Is that drug available in a generic?'” said Herrick. That’s the reason for the higher cost-sharing, says Herrick.
Rising premiums have a different cause, says Herrick.
“The reason for the higher premiums is the perverse programs like Obamacare that mandate the benefit package, drug coverage, and unlimited benefits,” said Herrick. Consumers have to pay more because they are forced to take more coverage than they want.
Power to the Consumer
The tax code is what led to the health care system now comprising one-sixth of U.S. gross domestic product, says Avik Roy, president of the Foundation for Research on Equal Opportunity and author of Bringing Private Health Insurance Into the 21st Century,
“[We’ve] become dependent on and addicted to this ‘drug’ of overly expensive health care, of which the employer base is a major driver,’ Roy told Health Care News.
Roy says consumer control is the key to the solution.
“A lot of things need to be changed,” said Roy. “But the most important thing we have to do is to put the control of health insurance in the consumer’s hands.”
Employers tend to pick insurance plans that serve their own interests, not necessarily those of the employees, says Roy.
“We need to give that money, that compensation, over to the worker to buy the coverage that the worker thinks is best for her or him,” said Roy.
One reason for the popularity of employer plans is the lack of cost penalties for preexisting conditions.
In that regard, Obamacare has been instructive, says Roy.
“In terms of standardizing some things around preexisting conditions, Obamacare did make it possible to go back and forth from the employer market to the individual market in ways that are smoother than they were before,” said Roy.
“The individual market didn’t work so well because the premiums were very high for preexisting conditions, said Roy. “The way Obamacare solved it, unfortunately, was not the best way to solve it, but the flipside is that by trying to address that problem, it makes the argument against being wedded to the employer-provided health care plans weaker, while making the argument for consumer control over their health care stronger.”
Employees Feel the Pinch
The Commonwealth Fund analysis, “How Much U.S. Households with Insurance Spend on Premiums and Out-of-Pocket Costs: A State-by-State Look,” was an attempt to look more closely at employer-based coverage, on which there has been “less attention,” than the public debate over plans on the Obamacare exchanges, the report states.
Some 158 million Americans get health insurance through employer plans, and “faced with rising premiums, U.S. employers are sharing more of the costs with workers,” the report states.
While the employer-paid percentage of health care has remained relatively steady over time, the rapidly increasing costs of premiums and deductibles are causing many employees to spend an ever-greater share of their income on health care.
“Employees face much higher insurance premium costs and out-of-pocket medical costs than they did in the past,” study coauthor David Radley told Health Care News. “The portion of the insurance premium that employers pay has been pretty steady over time: about 80 percent for single plans and 77 percent for family plans. But because the costs of the insurance plans are going up, employees pay more in absolute dollars.”
Leo Pusateri ([email protected]) writes from St. Cloud, Minnesota.
Susan Hayes, Sara Collins, and David Radley, “How Much U.S. Households with Employer Insurance Spend on Premiums and Out-of-Pocket Costs: A State-by State Look,” The Commonwealth Fund, May 23, 2019:
Avik Roy, Bringing Private Health Insurance Into the 21st Century, April 21, 2019: