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Report Details Expense Burden of Employer-Based Insurance on Families Across States

Allison Inserro
A new Commonwealth Fund report details the effects of high premium contributions and out-of-pocket spending relative to income for households with employer-based health insurance. 
Eight states had median household spending on premium contributions for employer coverage of $3000 or more, according to a brief released Thursday by the Commonwealth Fund. And 6 states had median combined household spending on premium contributions and out-of-pocket (OOP) costs of more than $5000.

Those are 2 examples of how despite having employer-based health coverage, households are saddled with high premium costs, high OOP expenses, or both, the brief reported, affecting about 23.6 million Americans.

The brief makes several policy recommendations, such as closing a loophole that keeps family expenses from qualifying toward marketplace subsidies under the Affordable Care Act (ACA).

However, on Thursday 2 Senate leaders released a bipartisan healthcare bill that seeks other changes, not mentioning the ACA, to lower the cost of healthcare. Senate Health Committee Chairman Lamar Alexander, R-Tennessee, and Senator Patty Murray, D-Washington, said that the draft includes proposals to address issues like surprise medical billing, drug prices, maternal mortality, and vaccine hesitancy.

In the Commonwealth Fund report, researchers found an estimated 17.4 million, or 11.6%, working-age adults and children younger than 65 had high premium contributions relative to income. This means household spending on plan premiums equaled or exceeded 10% of income.

Aside from premiums, an estimated 10.3 million working-age adults and children, or 6.8% percent, had high OOP costs relative to income. The study considered such spending to be high if it accounted for 10% or more of household income, or 5% or more for households below 200% of the federal poverty level (about $24,000 for a single person in 2016).

Four million adults and children were counted in both groups, meaning that they lived in households that were saddled with high premium contributions and high health-related OOP expenses relative to income.

Employer insurance premium contributions ranged from $500 in Hawaii to $3400 in South Dakota in 2016-2017. In 11 states, households in the top 10% of spending on premium contributions paid $9000 or more.

Across states, 6% to 17% of people had household premium contributions that were high relative to their income. By region, high premium contributions relative to income were common across the South.

By OOP costs, median annual spending on medical care ranged from $360 in Hawaii to $1500 in Nebraska. In 4 states, households in the top 10% of OOP expenses spent $7000 or more on these items.

Including both premiums and OOP costs, the median amount ranged from $1500 in Hawaii to $5540 in South Dakota.

The brief noted a few ways Congress could lower households’ premium contributions to employer plans.

Currently, under the ACA, a worker with employer premium expenses for a single-person plan that exceed 9.9% of income may be eligible for subsidized marketplace coverage. However, families that spend that much for a family plan are not eligible, creating the so-called “family coverage glitch.” The brief suggests that tying affordability and access to marketplace subsidies to the cost of family coverage would close that gap.

Second, Congress could raise the “minimum value standard,” or the percentage of medical costs that employer plans must cover, on average. When a plan fails to meet this standard, the employer is subject to a penalty, and enrollees may be eligible for tax credits to buy marketplace coverage.

Congress could also expand and standardize the set of services that are exempt from a plan’s deductible. It could also make a refundable tax credit available to people with employer coverage whose OOP spending for healthcare exceeds a certain percentage of income.

To truly be effective, however, the report said, efforts to constrain the cost of healthcare must be systemic, specifically prices paid to providers and hospitals. Prices vary not only across states but also within the same markets, stemming from private negotiations between providers and insurers.

The Alexander–Murray bill released Thursday, the Lower Health Care Costs Act of 2019, contains separate, discrete proposals. One section, for instance, deals with transparency in healthcare. It would designate a nongovernmental, nonprofit transparency organization. The entity would use “claims data from self-insured plans, Medicare, and participating states to help patients, providers, academic researchers, and plan sponsors better understand the cost and quality of care, and facilitate state-led initiatives to lower the cost of care, while prohibiting the disclosure of identifying health data or proprietary financial information.” The group would also create custom reports for employers and employee organizations seeking to use the database to lower health care costs, according to the bill.

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