Higher em­ployee cost-shar­ing could un­der­mine job-based cov­er­age sys­tem

Modern Healthcare - - COMMENT - By Dr. David Blu­men­thal

Most non-el­derly Amer­i­cans—about 156 mil­lion of us—get health in­sur­ance through our jobs, or that of a spouse or par­ent. Even af­ter the Af­ford­able Care Act is fully im­ple­mented, em­ployer-spon­sored in­sur­ance will con­tinue to be the largest source of cov­er­age by far.

But job-based in­sur­ance is a two-sided coin: It rep­re­sents both a ma­jor ben­e­fit for Amer­i­can work­ers and a ma­jor ex­pense for their em­ploy­ers. Thus, how com­pa­nies dis­trib­ute the costs for that in­sur­ance af­fects the wel­fare of fam­i­lies and busi­nesses alike.

In re­cent years, em­ploy­ees have found them­selves on the hook for more of those ex­penses. Be­tween 2003 and 2010, they went from pay­ing 17% of pre­mi­ums to 21%. This cost-shift­ing oc­curred at the same time that em­ployer-spon­sored plans were evolv­ing to be less protective. Dur­ing this time pe­riod, the per­cent­age of plans in­clud­ing a de­ductible grew from 52% to 78%, and the av­er­age de­ductible nearly dou­bled —from $1,079 to $1,975—for a typ­i­cal fam­ily plan.

This was also an era of rapid health­care- cost es­ca­la­tion, with over­all in­sur­ance pre­mi­ums grow­ing on av­er­age 5.1% a year. But af­ter 2010, a dif­fer­ent pat­tern emerged. Em­ployer- spon­sored plan pre­mi­ums grew by only 4.1% a year be­tween 2010 and 2013, re­flect­ing a slow­down in un­der­ly­ing health­care costs. Other fac­tors may in­clude pro­vi­sions of the ACA, which has limited the amount that in­sur­ance com­pa­nies can keep for ad­min­is­tra­tive ex­penses and prof­its. In 2014, pre­mi­ums grew by only 3%.

Good news for work­ers? Not yet. Even as the rate of growth in over­all costs has de­clined, em­ploy­ees have con­tin­ued to face dis­pro­por­tion­ate growth in health costs. Be­tween 2010 and 2013, the em­ployee share of over­all health costs grew by 9%, while em­ploy­ers’ con­tri­bu­tions grew only by 5.9%. The re­sult has been a con­tin­u­a­tion of the cost trans­fer from em­ploy­ers to em­ploy­ees.

There are two ways that em­ploy­ers could—if they wanted to—share the benefits of slow­ing health-cost growth with work­ers: by re­duc­ing the rate of in­crease in em­ploy­ees’ share of health costs; or by in­creas­ing wages. Nei­ther has hap­pened so far. Real wage growth re­mains weak and hasn’t topped 1% for sev­eral years.

The ques­tion is why em­ploy­ers are not pass­ing on th­ese sav­ings to their em­ploy­ees. One pos­si­bil­ity is that, at a time of com­par­a­tively high un­em­ploy­ment in many sec­tors, com­pa­nies are able to of­fer lower to­tal com­pen­sa­tion to work­ers. It’s a mat­ter of sup­ply and de­mand, and work­ers re­mem­ber all too well how hard things were dur­ing the Great Re­ces­sion. Mean­while, the retreat of trade unions may have made it dif­fi­cult for work­ers to claw back em­ploy­ers’ de­clin­ing health ex­penses at the bar­gain­ing ta­ble.

A sec­ond pos­si­bil­ity is that the cul­tural norms sup­port­ing the job-based in­sur­ance sys­tem are erod­ing. Em­ploy­ers may have come to feel that ever higher cost-shar­ing by em­ploy­ees is now stan­dard in the mar­ket­place, and that they owe it to in­vestors to fol­low this new “best prac­tice.” Work­ers may now ex­pect their health plans to come with rel­a­tively high de­ductibles and co­pay­ments, and th­ese low­ered ex­pec­ta­tions of plan benefits could be al­lay­ing em­ploy­ers’ qualms about pil­ing on even more costs.

Re­gard­less of the causes, th­ese trends bear close ex­am­i­na­tion. As the Com­mon­wealth Fund has re­cently re­ported, rates of un­der­in­sur­ance have risen over the past decade. Adults who are un­der­in­sured are less likely to re­ceive needed health­care—in­clud­ing cost-ef­fec­tive pre­ven­tive ser­vices and chronic care that avoids costly hos­pi­tal­iza­tions.

The un­der­in­sured are also more likely to find them­selves fac­ing bills they can­not pay, or even declar­ing bank­ruptcy be­cause of their med­i­cal debt. In many ways, their ex­pe­ri­ence more closely re­sem­bles that of the unin­sured than those with good, protective in­sur­ance.

Stag­nant wages make the bur­den of higher cost-shar­ing only harder to bear.

This raises an­other pos­si­bil­ity: If em­ployer-spon­sored in­sur­ance be­comes in­sur­ance in name only, it could fun­da­men­tally un­der­mine an in­sti­tu­tion that has been a foun­da­tion of the Amer­i­can health­care sys­tem for 70 years.

For their part, em­ploy­ers must ask them­selves whether in­creas­ing un­der­in­sur­ance among their em­ploy­ees will ad­versely af­fect the morale and pro­duc­tiv­ity of their work­force.

Even as the rate of growth in over­all costs has de­clined, em­ploy­ees have con­tin­ued to face dis­pro­por­tion­ate growth in health costs.

In­ter­ested in sub­mit­ting a Guest Ex­pert op-ed?

View guide­lines at modernhealth­care.com/op-ed. Send drafts to As­sis­tant Man­ag­ing Edi­tor David May at dmay@modernhealth­care.com.

Dr. David Blu­men­thal is pres­i­dent of the Com­mon­wealth Fund, a pri­vate foun­da­tion sup­port­ing in­de­pen­dent re­search on health pol­icy re­form and a high­per­for­mance health sys­tem.

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