Income volatility increases among working households, creating more problems with health care affordability
With many Americans working two jobs to make ends meet, even those with insurance are still skipping out on health care.
Middle and low-income households in the US are experiencing income volatility, which affects their ability to pay for health care, a new study says. The report from Brookings Economic Studies found that those in the study, working-age adults with a median income of $60,000, were showing signs of economic insecurity. The study found that more than half of the study participants relied on secondary sources of income such as part-time jobs to pay the bills.
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“The erosion of economic security for workers over the past four decades has been well-documented,” the study said. “Three primary indicators of this trend are declining wages, the erosion of benefits from private sector jobs, and rising income volatility.” With secondary sources of income being unreliable at times, these working-class families see fluctuations in their income that have an effect on their month-to-month finances. Workers who don’t know what their income will be cannot adequately budget for the future, the Brookings researchers noted.
The study also underscores affordability problems with the current American health system, at a time when 40% of adults with insurance say they have difficulty paying for medical care. The majority of participants in the study had health insurance, with three-quarters on employer-sponsored plans. “But health insurance was not enough to make health care affordable, beyond primary care or preventive services,” the report said. As a result of cost concerns, some in the study chose to skip or delay health care.
Increasing financial insecurity for the middle class
In a podcast from Brookings, Aaron Cline, a senior fellow at Brookings, noted that with the pandemic, economic insecurity has increased in the U.S. “Income volatility is rising… middle-class people are living paycheck to paycheck; this is not a phenomenon for the lower-income individuals.”
The researchers said they found a complex relationship between income volatility and ability to pay for things like health care services or prescription drugs. For some, their normal monthly income could cover expenses such as premiums, but an unexpected medical bill could be difficult to pay. For others, their primary income source alone was not enough to pay the monthly bills, so they relied on secondary income sources. And independent contractors saw varying income based on when they had contracted work. 2020’s pandemic made things worse, as jobs or hours that workers formerly relied on were reduced or disappeared entirely.
Health care implications
The study found that nearly 90% of participants had health insurance coverage. For most, routine primary and preventive care were affordable. The researchers noted that such visits usually have low or zero out-of-pocket costs.
Other types of care could be more problematic; consumers with high-deductible plans had different degrees of out-of-pocket expenses, with some less-generous plans leaving individuals responsible for a substantial amount of health care costs.
Participants described varying experiences with Health Savings Accounts (HSAs), with some being more comfortable with them than others. “HSAs were most effective for people who were more financially stable and who earned enough to save money each month,” the study said. “Of the participants who discussed HSAs, five were below the sample median age (four were in their twenties and one was in their 40s) suggesting that these plans were attractive to younger workers.”
Affordability issues affected many of the participants, with more than half saying they had a situation where they had to delay or skip medical care. Not surprisingly, those without insurance reported that they delayed or skipped care, but even those with insurance skipped or delayed care that was not covered by their plan, or treatments that had high copays. Confusion about what was covered and lack of transparency in the health care system also contributed to decisions about treatments.
Financial technology and apps—a limited impact on health care costs
The study also looked at how working-class Americans were using financial technology such as budgeting apps. These Fintech solutions offer consumers apps such as Earnin, which has several products, including a medical expense planning tool called HealthAid, and its Remedy app, which helps consumers detect medical billing errors. Another option was Even, an app that includes an HSA-like tool, where workers can plan for future health care expenses.
However, these types of apps seemed limited in the help they gave consumers. “Although apps can be helpful with income smoothing (Even) and more frequent payouts for hours worked (Earnin), they cannot fully compensate for the declining value of wages and an overall reduction in financial stability,” the study said.
“Technology may mitigate challenges associated with volatile income; it does not address the fundamental issue of inadequate wages and insufficient coverage from health plans,” the report said. “These two issues must be addressed in order to ensure that all Americans have access to affordable, quality health care.”
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