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More on high premiums and high out-of-pocket costs with employer plans

May 23, 2019

Topics: Quote of the Day

By Susan L. Hayes, Sara R. Collins, and David C. Radley
The Commonwealth Fund, May 23, 2019

In this brief, we use findings from the Current Population Survey (CPS), a federal survey of households, to report on the amounts that workers under age 65 and their dependents spent on premium contributions for their employer coverage and on out-of-pocket costs for health care.

This brief complements an earlier Commonwealth Fund state-level analysis of the size of employee premium contributions and deductibles reported by employers. The previous report looked at what workers were at risk of spending out of pocket to meet their deductibles when they used their insurance. This brief examines what workers report actually spending on care for themselves and their families.


Premium Contributions

  • The median, or midpoint, of annual household spending on employer insurance premium contributions ranged from $500 (Hawaii) to $3,400 (South Dakota) in 2016–2017. In 11 states, households in the top 10 percent of spending on premium contributions paid $9,000 or more.
  • Across states, 6 percent to 17 percent of people with employer coverage had household premium contributions that were high relative to their income. High premium contributions relative to income were common across the South.

Out-of-Pocket Costs

  • Median annual out-of-pocket spending on medical care ranged from $360 (Hawaii) to $1,500 (Nebraska). In four states, households in the top 10 percent of out-of-pocket expenses spent $7,000 or more on these items.
  • Across states, 4 percent to 11 percent of people with employer coverage had high out-of-pocket costs relative to household income.

High Cost Burdens

  • An estimated 23.6 million Americans with employer coverage had high premium contributions or high out-of-pocket costs relative to income, or both.

Total Household Spending

  • The median amount spent on both premiums and out-of-pocket costs ranged from $1,500 (Hawaii) to $5,540 (South Dakota).

There is growing evidence that the primary driver of per capita costs in private insurance are prices paid to providers. These prices vary across states and even within the same markets since they are the consequence of private negotiations between providers and insurers. Hospitals with more leverage in their markets are able to negotiate higher prices with insurers and employers. To arrest the growth in premiums and deductibles, more attention needs to be paid to what we pay hospitals and physicians.



By Don McCanne, M.D.

We hear repeatedly that support for single payer Medicare for All declines significantly when individuals are told that under single payer they would lose their option of enrolling in a private health plan. They certainly can’t be referring to plans in the individual market since complaints about about high premiums and unaffordable deductibles are so prevalent. So they must be referring to plans obtained through work. Yet this report shows that high premiums and high out-of-pocket costs are now creating financial burdens for workers in employer-sponsored plans as well. Over 23 million American workers faced high costs relative to their incomes.

Nancy Pelosi, Donna Shalala and others keep telling us that individuals want to keep these plans. Really? They want unaffordable premiums? They want high deductibles that create barriers to care? They want the plans to take away their choices of their health care professionals by requiring use of the insurers’ provider networks? They enjoy the surprise bills for services that they thought were covered? They don’t mind at all the instability of employer-sponsored plans considering that 66 million people leave their jobs each year? And no mention is made in this report of the forgone wage increases that pay for the employers’ contributions to these plans. Do workers really want to continue with the flat wages that they have been putting up with?

Who might these people be who want to keep these plans? Some might be healthy individuals who need very little health care and figure that these plans will be there for them should the need for major health care arise. Many of them are likely unaware that they may be vulnerable to unexpected costs, and that they may be limited by restrictions in their choices in health care. It is likely that many others simply do not understand that a well designed, single payer Medicare for all program would eliminate premiums and deductibles, replacing them with equitable taxes that everyone could afford, while granting them the right to have complete free choice of their health care professionals and institutions. They could have the health care they want, and it would be prepaid.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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