Millions of people covered by employer-sponsored health plans are spending more than 10 percent of their income on health care as the growth in health-care costs outpaces wage growth, according to a new study by the Commonwealth Fund.

Context

Employer-sponsored health plans are the most common type of health insurance for people under age 65, with some 150 million Americans covered. Whereas people who buy individual health plans are responsible for the entire premium and all out-of-pocket medical expenses, employer health plans are generally considered more affordable for individuals who have access to them because employers pay a large share of the premium.

But as health-care costs continue to rise, employers have been shifting some of the burden to employees through deductibles, which have grown 212 percent over the last decade, according to the Kaiser Family Foundation. With wages relatively stagnant, rising health-care costs are becoming more burdensome for families, even if the percent they pay remains the same.

Data

Researchers used health insurance cost data for 2016 and 2017 from the U.S. Census Bureau to study how much people under age 65 with employer health plans spent on premiums and out-of-pocket care expenses. They also analyzed the percent of people in each state who experienced premium contributions or out-of-pocket expenses that were high, relative to their income those years.

Results

About 23.6 million people with employer health plans spent at least 10 percent of their income on premiums, out-of-pocket costs, or both.

  • 13.3 million people spent 10 percent or more of their income on premiums alone.
  • 6.2 million people spent 10 percent or more of their income on out-of-pocket costs, not including premiums. (This also includes low-income workers who spent 5 percent of their income on out-of-pocket costs.)
  • 4.1 million reached both these thresholds, experiencing both high premiums and high out-of-pocket costs relative to their income.

The portion of Pennsylvania and New Jersey workers facing high costs relative to their income was in line with the national trend.

  • In Pennsylvania, families spent between $2,000 and $7,540 a year on premiums for employer health plans, and between $800 and $4,100 on other out-of-pocket expenses.
  • In New Jersey, families spent between $2,800 and about $9,600 a year on premiums for employer health plans, and between $700 and $5,000 on other out-of-pocket health expenses. The higher amount New Jersey workers spent on premiums and out-of-pocket costs was offset by higher average income.

Caveats

Generally health plans with higher premiums have lower out-of-pocket costs, while plans with lower premiums have higher out-of-pocket costs. But the amount people spend on care out-of-pocket depends both on the type of plan they have and their health needs.

Next steps

Researchers looked at the portion of workers spending more than 10 percent of their income on premiums, out-of-pocket costs, or both because the Affordable Care Act requires employers with more than 50 employees to offer “affordable” insurance, meaning a monthly premium is not more than 9.56 percent of their monthly salary. People whose premiums are more than 10 percent of their income are eligible for subsidies.

But the rule only applies to individual plans, which means families can end up spending much more than 10 percent on their premiums.

One way to control out-of-pocket costs for employees would be for Congress to apply the rule to family plans, too.

Lawmakers could also require more services be covered in full by health plans, without additional copays or costs to patients, or provide a tax credit to people with employer plans whose out-of-pocket expenses exceed a certain percentage of their income.