Cost of premiums, deductibles are an increasing burden on working Americans

Americans in employer-sponsored health plans saw the percentage of their income spent on insurance premiums and deductibles rise to 11.6% in 2020, up from 9.1% a decade earlier, according to a new report from the Commonwealth Fund.

In addition, premium and deductible costs equaled more than 10% of income for workers in 37 states by 2020, compared to only 10 states in 2010. In nine states, combined health care costs were more than 14% of annual median income.

The study is an overview of the burden of health care costs to workers, which has grown significantly over the past 10 years. However, the researchers found some good news in the numbers: the Affordable Care Act (ACA) has softened the blow during a time of economic upheaval, when many Americans were either laid off or chose to leave their jobs.

“Only about 6% of working-age adults reported losing their employer insurance during the pandemic-induced recession,” the report said. “Among those who did lose job-based coverage, fewer became uninsured compared to during prior recessions. This is because the ACA’s marketplace subsidies and expansion in Medicaid eligibility provided a safety net for those without access to another employer plan or COBRA.”

Health care is becoming less affordable

The report said affordability of health care coverage has become a key issue for working Americans. And health care is becoming more costly across the nation, the data shows.

Unlike 2010, when health care costs took up more than 10% of income mostly in the southern part of the United States, higher overall costs were found in states from all geographic areas in 2020. But there is still a geographic disparity: states with average health care costs of 12%-to-17% of household income were mostly found in the South in 2020; while states in the 10%-to-12% range were found in the Midwest, West Coast, and Northern Plains states. In the Atlantic region, only Delaware and Maine were in the higher cost tiers. Michigan and Minnesota were in the lowest-cost tier in the Midwest, as were Washington, Utah, and Hawaii.

“Added together, the average total cost of premiums and potential spending on deductibles across single and family insurance policies climbed to $8,070 in 2020,” the report said. “This ranged from a low of $6,528 in Hawaii to a high of more than $9,000 in Florida, Kansas, Missouri, South Dakota, and Texas.” The study also found that Americans in lower-wage jobs are paying a higher percentage of their income for health insurance premiums. “Workers in firms with lower average wages contributed a larger share of their overall premium for family coverage, and consequently a larger dollar amount, on average, than workers in firms with higher average wages,” the report said. “This differential was also evident for single-person coverage.”

High deductibles are also a factor: as these costs rise, research shows that Americans are more likely to skip health care treatments and doctor visits. The Commonwealth Fund study classifies Americans with higher deductibles as “underinsured.”

“A deductible that accounts for 5% or more of household income is one of our threshold measures of being underinsured,” the study said. “In nearly half the states, people at the midrange of the income distribution faced average deductibles that left them underinsured in 2020. In 2010, workers in just one state faced an average deductible that met that threshold.”

Rising health care spending drives premium and deductible costs

The report noted that spending per person in employer plans grew by nearly 22% over the period 2015 to 2019, outpacing both inflation and economic growth. The researchers said that prices charged by health care providers and drug companies were the primary driver of this spending, accounting for nearly two-thirds of overall spending growth.

“These high prices are the main reason why the amount that workers pay for their premiums and deductibles has grown over time. And because incomes have not kept pace, health insurance is taking up a larger and larger percentage of household budgets,” the study said. “To make matters worse, workers are making wage concessions for company benefits that often cover less of their health care costs.”

The report ends with a call for legislative action to address the rising health care cost burden on American workers. The researchers noted that the Build Back Better plan proposed by the Biden Administration would expand coverage, fix glitches in the current system, and enact stronger consumer protection rules.

“Employer health insurance is taking a big bite out of many working families’ incomes, leaving them with less money to spend on housing and food, and saddling millions with medical debt,” said Sara Collins, lead author of the study and Commonwealth Fund Vice President for Health Care Coverage, Access, and Tracking. “But policy solutions are available, including making the Build Back Better Act’s temporary coverage enhancements permanent and fixing the Affordable Care Act’s family coverage glitch. It’s time for policymakers to find ways to reduce the financial burden of health insurance coverage on working families.”