We spend fair amount of time discussing the soaring costs of Obamacare, but, as the Kaiser Family Foundation points out in a new study, employer sponsored plans, while not as bad as Obamacare, are also gradually pushing more healthcare costs onto their employees through surging deductibles and co-insurance payments all while wages remain fairly stagnant.
As Kaiser notes, the average deductible for an employer sponsored plan increased 400% between 2006 and 2017, actual deductible payments covered by employees increased 229% and co-insurance payments rose 89% all while wages only rose 31%.
Rising cost-sharing for people with health insurance has drawn a good deal of public attention in recent years. For example, the average deductible for people with employer-provided health coverage rose from $303 to $1,505 between 2006 and 2017.
While we can get a sense of employees’ potential exposure to out-of-pocket costs by looking at trends in deductibles, many employees will never reach their deductibles and other employees may have costs that far exceed their deductibles. In addition to deductible payments, some employees also have copayments (set dollar amounts for a given service) or coinsurance payments (a percentage of the allowed amount for the service). To look at what workers and their families actually spend out-of-pocket for services covered by their employer-sponsored plan, we analyzed a sample of health benefit claims from the Truven MarketScan Commercial Claims and Encounters Database to calculate the average amounts paid toward deductibles, copayments and coinsurance.
We find that, between 2005 and 2015, average payments for deductibles and coinsurance rose considerably faster than the overall cost for covered benefits, while the average payments for copayments fell. As can be seen in the chart below, over this time period, patient cost-sharing rose substantially faster than payments for care by health plans as insurance coverage became a little less generous.
From 2005 to 2015, the average payments by enrollees towards deductibles rose 229% from $117 to $386, and the average payments towards coinsurance rose 89%, from $134 to $253, while average payments for copays fell by 36%, from $218 to $139. Overall, patient cost-sharing rose by 66%, from an average of $469 in 2005 to $778 in 2015. During that period, average payments by health plans rose 56%, from $2,932 to $4,563. This reflects a modest decline in the average generosity of insurance – large employer plans covered 86.2% of covered medical expenses on average in 2005, decreasing to 85.4% in 2015. Wages, meanwhile, rose by 31% from 2005 to 2015.
Adding it all up, that means employees are paying roughly 65% more out-of-pocket for their healthcare than they were a decade ago.
That said, we're sure employers will undoubtedly focus on declining co-payments when pitching healthcare plans to potential employees while ignoring overall out-of-pocket expenses...and it probably works...at least in the short-term.
The relatively high growth in payments toward deductibles is evident in the changes over time in the distribution of cost sharing payments: deductibles accounted for 25% of cost sharing payments in 2005, rising to 50% in 2015. Conversely, copayments accounted for nearly half (46%) of cost sharing payments in 2005, falling to 18% in 2015. The increase in coinsurance over the period from 29% of total employee cost-sharing in 2005 to 33% in 2015 may reflect the strong growth over the period in plans that qualify a person to establish a health savings account; these plans are more likely to have coinsurance than copayments for physician services. Patients are more sensitive to the actual price of health care with deductibles and coinsurance than they are with copays, which are flat dollar amounts. The other difference between a copay and a deductible is that copays may add up over time, while a deductible may need to be met at once, causing affordability challenges.
Of course, as our readers are undoubtedly aware, a mere 65% increase in total out-of-pocket costs over 10 years would be music to the ears of those among us forced to purchase private insurance through Obamacare exchanges.