| Value Of Employer-Sponsored Health Plans Continues To Erode, Study Finds
The 161 million Americans with employer-sponsored health
insurance are shelling out more and more dollars from their own pockets
to cover medical services. That’s the finding of a comprehensive
study on trends in employer-sponsored insurance conducted by the
National Opinion Research Center (NORC) and Watson Wyatt Worldwide, and
funded by The Commonwealth Fund.
The study, recently published on the Health Affairs
Web site, found rising rates of underinsurance and unaffordability,
particularly among poorer and sicker people. In 2007, adults with
employer coverage faced an average of $729 annually in out-of-pocket
costs for medical services, including deductibles and other forms of
cost sharing, such as copayments and coinsurance. That represents a 34
percent increase from 2004, when the average out-of-pocket burden was
$545. Health plans covered a slightly smaller percentage of overall
expenses in 2007 than 2004, but growth in overall health spending was
the chief culprit behind rising out-of-pocket costs, according to the
report.
"The years 2004 through 2007 were a period of economic
expansion, yet rising healthcare costs still eroded the value of
employer-sponsored coverage," said Lead Author Jon Gabel, a senior
fellow at NORC. "Historically, employees have been asked to shoulder
even more of the cost-sharing burden during difficult economic times,
such as what the U.S. is now experiencing. Hence, it is imperative that
healthcare reform include constraints on health spending, or else
health insurance will become unaffordable for low- and middle-income
Americans, and reform itself will be unsustainable."
The study by Gabel and his colleagues updates earlier
studies on employer-sponsored insurance and out-of-pocket costs
published in 1997, 2000 and 2004. Among the major findings of the
latest study was the huge disparity in out-of-pocket spending among
low-and high-cost workers. Researchers found that the average
out-of-pocket expense for the 50 percent of workers with the lowest
health spending was $85 in 2007, while 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.
Another major finding of the study was a slight decline
in the actuarial value of employer-sponsored health insurance. While
most of the increase in out-of-pocket costs for workers was due to the
underlying growth in healthcare spending, the actuarial value of
employer-sponsored insurance declined slightly from 2004 to 2007.
Overall, these plans paid 81.4 percent of medical bills for all workers
in 2004, and 80.1 percent in 2007. This funding decline, according to
the study, resulted from increases in the percentage of plans with
deductibles and increases in average deductible level, in turn
reflecting the emergence of consumer-directed health plans, the decline
in market share for health maintenance organizations (HMOs) and
point-of-service (POS) plans, and the increased use of deductibles by
preferred provider organizations (PPOs).
The researchers were surprised by the fact
high-deductible health plans, coupled with employer contributions to
tax-favored savings accounts, had the highest actuarial value of all
plan types. Overall, these types of plans paid 91.1 percent of medical
bills. Their actuarial value, however, was concentrated among the half
of workers with the lowest health spending. Low-spending employees were
able to save nearly all of the $878 average contribution by the
employer for the savings account, but higher-spending employees paid
more out-of-pocket in these plans than did high spenders in other types
of plans. HMOs had the next-highest actuarial value, followed by POS
plans, PPOs, and high-deductible health plans without employer
contributions.
A third major finding was the growing ranks of people
considered "underinsured." Gabel and coauthors deemed individuals
"underinsured" if they would be expected to spend more than 5 percent
of their income out-of-pocket for medical services (excluding
premiums). For people with family incomes at 200 percent of the federal
poverty level, about 20.3 percent with employer-sponsored health
insurance exceeded this threshold in 2007, up from 16.5 percent in
2004.
"In the United States, if you are sick and earn a modest
income, then you are probably underinsured –even if you have
employer-based health coverage," the report stated.
To determine whether coverage was affordable, the
researchers looked at whether out-of-pocket spending for both premiums
and medical services would exceed 10 percent of income. Gabel and his
colleagues found that affordability declined at all income levels
between 2004 and 2007. For example, about 18 percent of those with
family incomes at 200 percent of poverty spent more than 10 percent of
their incomes out-of-pocket in 2007, up from 13 percent in 2004.
Address: National Opinion Research Center, 4350 East-West Highway, Suite 800, Bethesda, MD 20814; (301) 634-9300, www.norc.org/homepage.htm.
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