Premiums, deductibles eating up more of employees' incomes, finds Commonwealth Fund

Workers in the U.S are contributing more and more to their health plan premiums and deductibles, and the factors that are driving this trend are starting to emerge. Those contributions are increasing at a speedier clip than the rise of wages over the past 10 years.

Commonwealth Fund researchers recently sifted through Medical Expenditure Panel Survey Insurance Component Data, finding that between 2016 and 2018, deductibles increased by 4.8%, while premium contributions rose 4.2%. Median income rose by just 3.4% during that time frame.

That means the amount of people's income dedicated to healthcare has increased, and a state-by-state breakdown shows this trend is spreading. In 2008, average contributions exceeded 10% of median income in only seven states. Ten years later, it exceeded that threshold in 42 states. And in 16 of those states, contributions exceeded median income by more than 12%, with many of those states concentrated in the south.

From 2014 to 2016, deductibles rose by an average of 8.6% and premiums rose an average of 4.9%, with median income increasing 3.5%. But from 2016 to 2018, the rate of increase in both categories hit a low point, with median income remaining fairly flat.

That's a stark contrast to the window between 2008 and 2010, in which deductibles rose by 8.9% on average, with premiums rising 4.7%, and media income actually declining by 1.5%.

WHAT'S THE IMPACT

In 18 states, the average health plan deductible is now 5% or more of income, meeting the threshold for underinsurance. While the 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 U.S. are not experiencing healthcare 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% of their incomes on premiums and meeting deductibles, compared to an average cost burden of 8.4% in Massachusetts.

Higher costs for insurance and healthcare 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 ate up 36% of average family income in 2018.

The Affordable Care Act provides some cost protection to people with employer coverage. First, people with low incomes -- 138% of the poverty level (or just under $17,000 for an individual) -- are eligible for Medicaid in the 33 states and Washington 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.

Also, people with employer premium expenses that exceed 9.86% 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% (i.e., covers less than 60% of their costs on average). There's a catch, though: 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 LARGER TREND

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.

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com