American families with employer-based health insurance aren't really seeing the benefits from the tepid growth in the country's healthcare spending, according to a new Commonwealth Fund report released Tuesday (PDF).
That's because the rate hikes of their monthly premiums continue to outpace growth in salaries and wages, the report said. Employees are also being increasingly directed to high-deductible health plans—and that means more of their disposable income is going toward out-of-pocket medical costs.
Employers provide health coverage to 153 million people, or more than half of all Americans younger than 65. Using federal data on employer medical costs, researchers found that premiums for families with employer-funded insurance rose 73% from 2003 to 2013. Premiums for people with individual plans soared 60%. However, median income only climbed 16% over that decade.
That's having a bigger effect for middle-class and poor Americans who have to weigh the costs of their health insurance with other daily expenses.
“If your budget or income isn't growing, then expenditures like healthcare are going to start crowding into other expenditures like housing and paying for cellphones,” said Sara Collins, a healthcare economist at the Commonwealth Fund and co-author of the report. “This is a basic necessity for people.”
In addition, more employers are choosing high-deductible health plans for their employees. In these plans, insurance covers the costs of healthcare services only after employees reach their deductible, which for families can stretch beyond $10,000 in a year. It's a double-whammy for many workers, experts say, because the higher out-of-pocket expenses come on top of their increasing premium contributions.
High-deductible plans have proliferated in the employer space, and they are also one of the most common options for people buying individual coverage on the Patient Protection and Affordable Care Act exchanges.
The Commonwealth Fund's report, similar to findings from the Kaiser Family Foundation in September, comes on the heels of recent healthcare data from the federal government. Last week, the CMS said national healthcare expenditures grew only 3.6% in 2013, the lowest mark in more than a half-century. Economists and scholars have attributed the low growth rates, which have persisted since 2009, to the recession as well as the Affordable Care Act.
But the shift among employers to high-deductible plans also appears to have a bigger influence on keeping healthcare costs down, for better or worse, the report and other insurance experts said.
“You do have to wonder, as employers shift more and more costs to employees, particularly in the form of high deductibles, has that had an effect on depressing utilization?” said Sabrina Corlette, a senior research fellow at Georgetown University's Center on Health Insurance Reforms. “It's almost like a self-fulfilling prophecy.”
Although premiums and deductibles have leveled off in the past few years, which the Commonwealth Fund called a “cause for optimism,” employees are still facing much higher annual deductibles than a decade ago.
In 2013, the average deductible for a single employee in an employer plan was $1,273—a 146% jump from than an average of $518 in 2003, according to the report. Jon Gabel, a senior fellow at independent research organization NORC at the University of Chicago, said he has seen similarly high rates of increases in health plan deductibles, especially after the financial collapse began in 2008.
The Commonwealth Fund says many families aren't able to see the benefits of tame national healthcare spending growth because of the trends in their benefits. “Insurers and employers should likely consider alternative benefit designs rather than just increasing deductibles every year,” Collins said.
However, employers say they are helping defray those deductible costs for employees through tax-free mechanisms such as health savings accounts. Karen Marlo, a vice president at the National Business Group on Health, which represents some of the largest employers in the country, said the median contribution to a health savings account last year was $600 per employee.
“Everyone's paying more,” Marlo said. “It's really a challenge of how do we control healthcare costs in this country.”
Follow Bob Herman on Twitter: @MHbherman
