Employer-Sponsored Health Costs Rise, Call For ACA Expansion

With rising employer-sponsored health plan costs, limited options under the Affordable Care Act (ACA), and millions of people losing employer-sponsored health coverage since the onset of COVID-19, struggling families and individuals may be burdened further by healthcare costs, according to data outlined in a brief from the Commonwealth Fund.

Before the onset of COVID-19, approximately half of the United States population (160 million people) had employer-sponsored health plans. Just three months after the pandemic hit, a total of 14.6 million workers and their dependents lost employer-sponsored health coverage. Continued losses are expected as the public health crisis carries into the new year.  

For individuals who lose employer coverage or cannot afford employer coverage, the ACA is a safety net that offers coverage through Medicaid or the individual market and the marketplaces. However, insurance under the ACA comes with limited options and complex eligibility rules.

By analyzing trends from the federal Medical Expenditure Panel Survey Insurance Component (MEPS-IC), the Commonwealth Fund found that premium and deductible costs in employer-sponsored health plans have risen steadily for middle-income people over the past 10 years.

In 2019, premium contributions and deductibles in employer-sponsored health plans made up 11.5 percent of median household income nationwide, a noticeable increase from 9.1 percent in 2010.

In 2010, ten states had premium contributions and deductibles that accounted for ten percent or more of median income. In 2019, that number rose to 37 states. Additionally, nine states (Arkansas, Louisiana, Mississippi, Florida, Oklahoma, South Carolina, Tennessee, New Mexico, and Texas) had combined costs of 14 percent or more of median household income in 2019.

New Mexico and Louisiana faced the steepest potential costs, each accounting for about 17 percent of the state’s median household income.

Hawaii had the lowest cost of premiums and potential spending on deductibles across both single and family policies at $5,535. In states such as Florida, Louisiana, Missouri, New Hampshire, and Oklahoma, the potential costs were as high as $8,500 a year.

The dozen states that have yet to expand Medicaid are among those where workers are experiencing the highest cost burdens. “Expanding Medicaid would provide relief. These changes have the potential to help millions of people struggling to afford their health care,” the brief states.

The brief made predictions on how COVID-19 and its associated recession will affect the variables of median household income, premium contributions, and deductibles.

The Commonwealth Fund predicts that the prolonged recession will lower US median income growth as the pandemic impacts more industries. Even if premium contributions and deductibles were to stay the same, they could take up a larger fraction of workers’ incomes in 2020 and 2021.

As far as COVID-19’s effects on premium contributions and deductibles, the future is uncertain as they depend on trends in healthcare costs, according to the brief. The past year has seen spikes in healthcare spending due to COVID-19 hospitalizations as well as sharp declines in spending from drops in nonurgent care. Overall, the net effect appears to be lower spending and higher profits for insurance companies.

The ACA requires insurers to return excess profits to employers and their workers which could mean lower premiums in 2021 if payers anticipate these trends will continue.

The brief used data on total insurance costs, employee premium contributions, and deductibles from the Agency for Healthcare Research and Quality’s annual survey of employers conducted for MEPS-IC. In 2019, the survey reached 40,451 establishments and had a response rate of 59.2 percent. From 2010-2018, there was a similar number of surveys, but there was a greater response rate.