Polls suggest most working-age Americans are satisfied with their employer-based health insurance. That could easily change when this deficit-fueled economic expansion ends, as it inevitably will.
A poll conducted last fall by the Commonwealth Fund showed 48% of the privately insured were “very satisfied” with their healthcare coverage. Another 38% said they were “somewhat satisfied.” Only Medicaid ranked higher.
It’s understandable why most workers like their plans. They rarely use them.
It’s the inverse of the 20-80 rule, which predicts 20% of the population will consume 80% of healthcare services. That means 80% of the public is responsible for 20% of spending. Indeed, half the population accounts for just 3% of total healthcare consumption—a mere $276 a year on average.
No employer should take solace from satisfaction ratings that are based on unfamiliarity with the system. That support could evaporate in an instant.
It’s already fraying. A large majority of these healthy breadwinners aren’t fretting over out-of-pocket spending since they pay so little. They’re far more worried about the portion of premiums that come directly out of their paychecks.
Moreover, recent trends in employer-based coverage have put millions of families at risk of unaffordably high expenses. They are joining the millions more—the 20% of people with serious illnesses—who are already feeling the pain.
The number of employees in high-deductible plans—defined in 2019 as having to pay the first $1,400 expenses out-of-pocket in an individual plan or $2,800 in a family plan—has reached 46% of the privately insured. That’s up from 17% a decade ago. While many large employers subsidize health savings accounts when they make the switch to a high-deductible plan, those funds are quickly exhausted by a serious illness.
HSAs are particularly inadequate for people with chronic conditions, which now affect 4 out of every 10 Americans. The high deductible must be paid anew every year.
There’s also a hidden drain on household finances from rising paycheck premiums for employer-based coverage. Last year’s Kaiser Family Foundation employer survey showed the average premium for a family-based plan reached $20,576. Workers paid $6,015 or 30% of the total out of their paychecks. That’s 10% of the median household income.
That total has edged up over the last decade as employers shifted a growing share of total costs onto workers. Premiums shot up 7.1% a year on average over the decade compared with just 4.8% for the employer share.
Enough numbers. The bottom line is simple. None of the recent moderation in healthcare costs has increased workers’ take-home pay. Rather, their total out-of-pocket spending continues to rise much faster than wages.
This brings me to a final point. Some healthcare economists claim that “out-of-pocket” costs aren’t a problem since they have remained stable at about 10% of total healthcare spending. But that ignores premiums, which, as we just saw, are climbing rapidly; and it ignores that most out-of-pocket spending falls disproportionately on the very sick, who have few options.
We know what happens when sick people are confronted with higher co-pays and deductibles. They stint on care with little capacity to distinguish between high-value and low-value care.
Employers across the country are aware of these problems. Over the past couple of years, the share of workers forced into high-deductible plans has plateaued. Some employers are forging innovative partnerships with providers to work on lowering costs.
But when the economy hits its next rough patch, as it inevitably will, isn’t it likely that employers, who already subsidize public programs, will resume shifting more of their own costs onto their workers? That’s when we’ll find out if the public is truly committed to employer-based coverage.