Study: Employees to Pay More for Care

Chelsey Ledue, Contributing Editor

WASHINGTON – The 161 million Americans with employer-sponsored health insurance are facing substantial increases in out-of-pocket costs, according to a study funded by the Commonwealth Fund.

The study, which appeared on the Health Affairs Web site, was authored by researchers from the National Opinion Research Center and Watson Wyatt Worldwide. It examines trends in employer-sponsored insurance from 2004 to 2007 and finds rising rates of underinsurance and lack of affordability, particularly for poorer and sicker people.

In 2007, adults with employer coverage faced an average of $729 annually in out-of-pocket (OOP) costs for medical services, including deductibles and other forms of cost-sharing such as co-payments and coinsurance. That represents a 34 percent increase from 2004, when the average OOP burden was $545. Health plans covered a slightly smaller percentage of overall expenses in 2007 than 2004, but growth in overall healthspending was the chief cause behind rising out-of-pocket costs.

“There are two phenomena acting in tandem,” said David Knowlton, board member for the HealthWell Foundation.

“Healthcare costs are going through the roof and the out-of-pocket costs are a bigger percentage of a person’s income.”

Chronic diseases and age have some effect, too, he said.

“The second piece is that healthcare costs get more unaffordable for employers; they are shifting costs and premiums to the individual,” said Knowlton.

“Historically, employees have been asked to shoulder even more of the cost-sharing burden during difficult economic times such as the United States is now experiencing,” said lead author Jon Gabel, a senior fellow at NORC in Bethesda, Md.

According to the study, out-of-pocket spending varied widely among low-cost and high-cost workers. The average OOP expense for the 50 percent of workers with the lowest health spending was $85 in 2007, whereas for the highest-spending 1 percent and 10 percent of employees it was $8,703 and $3,364, respectively. Health plans paid for a greater share of spending by adults with chronic conditions, but these individuals also had relatively higher out-of-pocket costs.

This resulted from increases in the percentage of plans with deductibles and in average deductible levels, reflecting the emergence of consumer-directed health plans, the decline in market share for health maintenance organizations and point-of-service plans and the increased use of deductibles by preferred provider organizations.

“As the nation debates health reform, these findings highlight the need to ensure that workers and their families will have access to affordable health insurance coverage that protects them from high out-of-pocket spending regardless of whether they are healthy or sick,” said Commonwealth Fund President Karen Davis.

In 2007, among those with family incomes at 200 percent of poverty who were among the top 25 percent in healthcare spending, the underinsurance rate was 71 percent.

Of the increase in total OOP payments for workers between 2004 and 2007, the study found that about 57 percent was attributable to higher cost sharing for medical services and 43 percent to higher premium contributions.