The Slowdown in Employer Insurance Cost Growth: Why Many Workers Still Feel the Pinch - The Commonwealth Fund

The Slowdown in Employer Insurance Cost Growth: Why Many Workers Still Feel the Pinch - The Commonwealth Fund

Comment by Don McCanne

With all the talk this week about double-digit percentage increases in premiums for plans
offered in the ACA exchanges, there is risk that this report my be lost
in the background, though, for most Americans, this report is of far
greater importance. For employer-sponsored health plans - where most
individuals receive their health coverage - the percentage of household
income used to pay premiums and deductibles has increased sharply in the
last decade - from 6.6% to 10.1%.

To quickly dismiss the concern about premium increases in the ACA exchanges,
although the average increase will be about 25%, of the 10.5 million
enrolled only about 1.5 million in the exchanges will see the full
increase since the others will be protected by premium subsidies. It may
also impact the 7 million who buy individual plans outside of the
exchanges. That 8.5 million combined is about 2.7% of the population,
though most will have the option to shop for lower premium plans.
Besides, these increases do not represent health care inflation but are
rather due to intrinsic defects with the business model of competing
private health plans. Healthier individuals are less inclined to enroll,
making the risk pools more expensive, but it is likely that the greater
factor was the insurers low-balling the initial premiums in an attempt
to gain greater market share (though they will never admit this).

In contrast, about 154 million people - 57% of the U.S. population under
65 - obtain their insurance through their work - a far larger group than
those who buy plans on the exchanges. But look at what is happening to
them. Their share of insurance costs are consuming an ever larger
percentage of their incomes. This financial burden on the typical
working family is great enough to prevent them from receiving some of
the essential health care services that they should have - impairing
access due to lack of affordability.

Note that this is not due to the Affordable Care Act. These individuals and
families do not buy their plans through the exchanges, and they receive
no public subsidies (except for regressive tax expenditures unfairly
benefiting primarily higher income individuals). Rather than blaming the
Affordable Care Act, we need to blame legislators and the policy
community who insisted that we keep this dysfunctional health care
financing system in place.

While rejecting single payer, some of our political leaders are suggesting that we fix
what we have - tweak the system until it works. One candidate for
president suggests enacting a refundable tax credit of up to $5000 to
help pay excessive out-of-pocket health costs, and that would help these
individuals. But the problem is that it only pours more tax funds into
our overpriced and administratively-burdened system without correcting
any of the defects that have made our financing system so dysfunctional.
And who pays those taxes? A bit of a shell game, I’d say.

We’ve had a lull in spending, but that was partly due to the recession. The
other important factor that has slowed spending is what this report is
all about. Regardless of ACA, health care costs are being shifted to
plan beneficiaries strictly to protect the markets for the insurers by
slowing the rate of premium increases. This has the deleterious effect
of slowing spending by reducing the affordability of care and thus
reducing access to the care that patients should have. Bad policy.

The solution is really simple. Fund a single universal risk pool with
equitable taxes that everyone can afford, and then use that risk pool to
pay for all necessary health care for everyone. Why didn’t those single
payer people think of that? Oh. They did.