One of the rituals that has unfolded in the last few years across the country in corporate conference rooms, large and small, is the annual "open enrollment" period where those fortunate enough to have some form of employer-based health insurance get to "select" their options for the coming year. Most of the employees who attend these mandatory meeting are not highly compensated--for the most part the audience for these forced get-togethers are support personnel, many who toil in a permanent salary range of 30-50,000 a year. Many will never earn a whole lot more than that, even if they stay with the company ten or twenty years.
The "Open Enrollment" is usually conducted by a slightly-too-upbeat and cheerful HR person employed by the firm or company. They have the dubious privilege of informing their co-workers of the "options" available to them, usually one or two pre-selected, take-it-or leave-it "plans" provided by Aetna, United Health, Horizon or some other such health insurance multinational conglomerate. Often a young, twenty-something, suited representative from one of these behemoths is on hand, to answer any questions about their take-it-or-leave it policies, but the one fact that cannot be questioned is that this is the only game in town. You will accept the terms or you will go uninsured, and good luck finding an employer who offers anything better.
For most companies seeking to reduce their health care outlays (and at the same time preserve the profits enjoyed by their highly compensated employees), the solution offered by the health insurance industry is the "high-deductible" plan. While shaving off a tiny amount in already sky-high monthly premiums charged to the employee every time he/she receives a paycheck, these policies essentially require the employee to pay out of pocket the full cost of their health care up to a certain threshold, before insurance kicks in and pays a percentage afterwards until a wide-ranging "out of pocket" limit is reached, sometimes between $6000 and $12,000. Since most plans only pay up to 80% of continuing care costs until the out of pocket figure is exhausted it's fairly easy to rack up thousands in medical debt very, very quickly, depending on how sick you are. The deductible threshold can be $2000.00, $4,000.00 or even higher for families in some cases. As a practical matter, for anyone who gets sick this amounts to a significant pay cut, most significant for those making less than $50,000.00 -60,000.00 per year (before taxes), or the vast majority of American workers.
The uniform dismay at the quality of the "product" is always palpable in these meetings but even more so among lower compensated employees, those making barely enough money to pay their rent or food bills after taxes, let alone putting something aside for, you know...life. Often the folks working these types of jobs are women and it seems to be an unspoken article of faith among many employers that they will have spouses who somehow make more than they do, and therefore it will all somehow average out and no one will be driven into medical bankruptcy. Of course, more often the case is that their spouse is making about the same amount or even less. But for all but the most highly paid, these health care plans are a de facto huge cut in wages that doesn't show up on any statistical assessment of wage growth in this country. Contrary to the conventional wisdom, wages aren't only stagnating--with these plans as a factor in the mix they're actually diminishing. Even more than the much-documented and discussed lack of wage increases, the proliferation of these health care plans has done much to eliminate what we once knew as the "Middle Class."
Insurers, raking in billions from hawking these plans to business, have come up with reflexive rationales that are rather reminiscent of the justifications corporations invented for dumping pensions--they argue that the high-deductible plan prompts people to make "better decisions" about their health care and encourages them to "shop around" in a (largely mythical) "health marketplace" to find the plan that suits their needs best. The idea that fearful people experiencing a critical medical condition would not have the ability or time to navigate the byzantine and often deliberately opaque universe of medical providers to obtain cost comparison information seems to have never occurred to these companies. In the non-jargon world of reality, however, the advent of these plans has led to two distinctly bad outcomes--self-rationing of critical health care and, in many cases, economic distress. As Sara Collins, vice-president of Health Care Coverage and Access, at the Commonwealth Fund, a health care research foundation puts it:
"[I]t's really a stretch to think that deductibles are going to turn people into better shoppers when in fact there's so little information about the price of health care services or the quality of services," she says.
On top of that, Collins argues, the idea that high deductibles will contain health care costs is misleading. It's serious illnesses that drive health care costs, she maintains, not preventative services or prescriptions.
"The deductibles are putting more of a burden, as they get larger, on middle-income families, even though their ability to slow health care cost growth is really not that great," she says. "They're not addressing where the big costs really are - that's going to require a different approach than just increasing deductibles."
Now a study
by the Kaiser Family Foundation reveals what should have been intuitive from the outset--many Americans cannot afford these deductibles:
A new analysis points to the difficulty families have paying for the ever-growing cost of health care, especially given increasing deductibles.
The Kaiser Family foundation analysis released Wednesday finds that most families don’t have enough assets to cover a mid- to higher-range deductible in a private health insurance plan.
Specifically, Kaiser said, less than two-thirds (63 percent) of non-elderly households with incomes above the federal poverty level have sufficient liquid financial assets to cover a mid-range annual deductible of $1,200 for an individual or $2,400 for a family.
By comparison, the average general annual deductible for single coverage among workers enrolled in an employer-based health plan was $1,217 in 2014.
About half (51 percent) of households have enough liquid assets to cover a higher-range annual deductible of $2,500 for an individual or $5,000 for a family. In 2015 plans offered through Healthcare.gov, the average combined medical and drug deductible for single coverage in a silver plan was $2,556.
The study shows that Low-income to Moderate-income workers in particular are increasingly being priced out of the market because of these high-deductible plans.
The situation is even worse than the research suggests. The Kaiser study assumes that all of the liquid assets available to American workers can be used to pay off medical bills. Obviously, that's not the case. In practical terms what this means is that people must choose to delay or forego medical care because they can't afford to pay for these deductibles, or they simply need the money for something else, such as food and shelter, or that $920 car repair.
In an effort to partially compensate for the enforced pay cut these employees receive, many employers offer in addition Health Savings Accounts which permit an employee to divert money from his/her paycheck into a specialized account (for which a financial institution gets a monthly or quarterly cut, called a "service fee") which permits medical expenses to be withdrawn tax-free. While this sounds appealing on a superficial level, it does very little to offset the high-deductibles an employee must continue to pay through his health insurance, deductibles which have risen 50% since 2009 alone. A recent study by the Center for American Progress has also demonstrated that while employer costs for health care have, in fact, decreased somewhat due to the spread of these high-deductible plans, health care spending on the part of workers themselves has increased. In other words, these plans have not benefitted employees, but employers. Since wages, in the meantime, have stagnated, it's not hard to figure out where the extra savings went.
Nor has the Affordable Care Act solved the problem, although its provisions allow for cost-saving reductions to many low-income participants. Many policies available on the Exchanges continue to incorporate high deductibles. Despite the ACA, affordable medical care for the majority of Americans continues to be a luxury rather than a right. It remains to be seen how long Americans will tolerate this race to the bottom:
How far employers can reduce this benefit and still make it attractive to workers isn't totally clear. If the whole employer-sponsored market moves in this direction, companies that pay less for their workers' care won't have a competitive disadvantage.
There's also a possible world in which employers don't bother to offer insurance at all, and move their workers to the Obamacare exchanges. They would have to pay a penalty, but in many cases that would be significantly less than the cost of providing health insurance. So far, though, we're not seeing much evidence of that happening.