This was one of those "good news/bad news" weeks in health insurance news, both bits coming from a relatively overlooked segment since the roll-out of Obamacare; the employer-based insurance market. On the one hand,
we learned that premium hikes in those plans were very modest for 2014. On the other, we found out that deductibles in those plans are exploding. To just put a topper on that, the same study shows that since 1999, premium hikes have far, far outstripped wage increases. A
second study released this week suggests that these growing insurance costs in the employer-based market are holding down wages and fueling economic inequality. All of which boils down to one conclusion: The Affordable Care Act is great as far as it goes, but reform isn't done. Not by a long shot.
Just take a look for yourself below the fold.
New
research from the Kaiser Family Foundation and the Health Research and Educational Trust (HRET) shows that premiums for the year rose just 3 percent, a modest increase and a welcome deviation from years and years of double-digit increases. What's more, the increase this year is about the same as the rise in worker’s wages (2.3 percent) and general inflation (2 percent), so it's a year of holding steady. Sort of. Because there's also this part: "This year, 80 percent of all covered workers face a general annual deductible, with the average deductible reaching $1,217. Workers typically must pay this deductible before most services are covered by their health plan.
Since 2009, the average deductible has risen 47 percent from $826." While the average deductible this year is $1,217, more than a third of workers—34 percent—are enrolled in plans that have a deductible of $2,000 or higher.
So slow premium growth is great, but it's not much of a relief to the person paying $2,000 out-of-pocket for health care, and who is seeing what would have been her raise instead being plowed by her employer into paying for her health insurance. That's the trend researchers from the Commonwealth Fund have studied, and they find that it could very well be contributing to income inequality in the U.S.
The writers start from the premise, well-accepted by economists, that employers treat health insurance as part of the whole of workers' compensation—wages and benefits are just one expense to the employer. To keep that expense level, as premiums rise—and the amount that employers have to kick in rises—wages stagnate or even decrease. The result:
Because health costs have grown so quickly over the past several decades, an increasing share of workers’ total compensation has gone toward health insurance premiums. These higher premiums partly explain why middle-class wages have stagnated, lagging productivity gains. Rising health care spending—both on premiums and out-of-pocket costs—totally erased wage gains for a typical family from 1999 to 2009.
Of course, those costs haven't caused the same degree of pain for everyone. For families in the lower 40 percent of income distribution, the average employer-sponsored insurance premium rose from $3,660 to $15,745—from 13 percent of income to 60 percent—from 1988 to 2012. But for the top 5 percent of earners in that period, the premium increase as a percentage of income was basically minuscule, from 1.4 percent to 4.5 percent of income.

The authors do point out that "insurance coverage provided through employer-sponsored plans may have disproportionate value for lower-income workers," particularly if they're unhealthy and end up using a lot of health care, but that the huge chunk of money they're putting into health care doesn't necessarily have a good return. The cite the Institute of Medicine, which estimates that about 30 percent of health care spending is wasteful—on treatments that are unnecessarily or unhelpful, for example. And, for "lower-income workers, wasting 30 percent of what they pay for health care is a far greater burden than it is for higher-income employees."
Then there's this:
According to a [2011] Census Bureau measure, the national poverty rate increased by 3.3 percentage points, or by about 10 million people, when family incomes were adjusted for out-of-pocket medical costs. In other words, health care costs may be directly increasing the number of Americans living in poverty. This is consistent with the observation that health care–related expenses contribute to more than half of personal bankruptcies in the United States. Most of these medical debtors worked in middle-class occupations and had health insurance.
The Affordable Care Act will help, partly, particularly by bringing more people into Medicaid. Subsidies also make premiums more affordable for many—but that's for the many who
aren't in the employer-based health insurance system. For them, even modest premium increases can end up keeping their wages from increasing. When you add in the hit that rising deductibles is creating, incomes are stretched even thinner. At a certain point, even people with health insurance will avoid seeking care because their deductibles make it too expensive. They will be able to get annual physicals and preventive health screenings without paying, but beyond that, health care can just cost too damn much.
There's no question that Obamacare has achieved a lot of good—millions newly insured, Medicare costs remarkably shrinking, and an end to some of the worst practices by health insurance companies locking out the people who need health care the most. But reform just simply is not done yet. Not if one of the end goals of reform is actually reducing financial insecurity for people.