Incomes not keeping up with total costs in employer-based insurance
Taken together, premium and deductible costs for employer-based plans now amount to more than 11 percent median income.
The emergence of health care costs as a top concern for Americans is not surprising, considering a new Commonwealth Fund report that confirms what many already knew: incomes are not keeping up with health care costs for most consumers.
The new report: “Trends in Employer Health Care Coverage, 2008–2018: Higher Costs for Workers and Their Families,” finds that health care costs have been growing faster than median incomes for all states in the last decade.
Related: Health care costs eating the young alive
The study provides a state-by-state look at how much health insurance has cost Americans in premiums, deductibles, and as a share of their income from 2008 to 2018. The report focused on middle-income Americans with employer coverage; workers in lower-income brackets are even more likely to struggle with health costs, the study said. Regionally, the hardest-hit states are in the South, where median incomes tend to be lower.
“Over the last decade, employer health insurance premiums and deductibles have grown faster than workers’ wages,” said Sara Collins, lead author of the study. “This is concerning, because it may put both coverage and health care out of reach for millions of people. Several simple policy steps, such as fixing the Affordable Care Act’s family coverage glitch, have the potential to make health care more affordable for U.S. families.”
(The “family coverage glitch” refers to an ACA regulation that bases federal subsidies on an employee’s earnings for an individual—not the costs for the entire family.)
Health costs take a large—and growing—portion of workers’ incomes
The study found that taken together, premium and deductible costs for employer-based plans amounted to more than 11 percent median income. “In 42 states, premiums and deductibles were 10 percent or more of the median income, compared to only seven states in 2008. In Mississippi and Louisiana, this combined cost accounted for 16 percent of household income — the largest share among states,” the report said.
And health insurance costs are growing faster than incomes are rising. In the decade between 2008 and 2018, premium costs for employees grew at an average rate of 4 percent. Median income growth was slower or going in the other direction—during the recession from 2008 to 2010, it was minus-1.5 percent, and from 2016 to 2018, income growth was at 3.4 percent.
Premiums and deductibles—both are rising
The study found that premiums have been on the rise, up from an average of 5 percent of median income a decade ago to 7 percent in 2018. But deductibles are an even bigger problem, according to the Commonwealth Fund report.
“In many states, workers are saddled with high deductibles relative to their income. This leaves many at risk of being “underinsured” and more likely to struggle paying medical bills and more likely to skip care because of costs,” the report said. The study defined underinsured households as having a deductible equivalent to 5 percent or more of income.
Nationally, the study found that the average deductible for a middle-income family amounted to 4.7 percent of income in 2018, which was up from 2.7 percent in 2008. Average deductibles were 5 percent or more of median income in eight states, the study said, and as high as 6.7 percent in Mississippi.
The study noted that its report comes at a time when policy makers are looking at a variety of solutions to improve health care coverage and affordability.
“The majority of people under age 65 in the U.S., 164 million, get their health insurance through an employer, and that insurance is less and less affordable for many of them,” said David Blumenthal, M.D., Commonwealth Fund President. “Ensuring that everyone can afford health insurance and health care will require policy fixes and systemwide efforts to get to the heart of the health care cost problem — the exorbitant prices we often pay for health care in the United States.”
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