Monday, April 15, 2019

Cold comfort for low income workers insured through their employers

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The Kaiser Family Foundation and the Peterson Center on Health Care released a report yesterday showing that low income families enrolled in employer-sponsored health insurance (ESI) pay a much higher percentage of their income on premiums and out-of-pocket expenses than do higher income employees. That isn't surprising, though the percentage of income eaten up by healthcare is disturbing. Families in ESI earning up to 199% of the Federal Poverty Level (FPL) spend an average of 14% of income on healthcare, according to Kaiser's analysis of Census data. Families with at least one member in poor or fair health spend an average of 18.5% of income on healthcare.

What is somewhat surprising -- to me, anyway -- is that lower income families with ESI do not spend more in absolute terms than better-paid employees. I was under the impression that low income workers are often offered much skimpier insurance than higher income workers. That impression was at least partly derived from Kaiser's annual Employee Health Benefits Survey. Here's the contrast between employers with mainly low- vs. high-income employees from the 2018 survey:

Deductibles are also higher in firms with more low-wage workers, though only modestly.

According to the new report, however, spending on both premiums and out-of-pocket (OOP) costs rises with income, both for the healthy and the sick:

With regard to OOP, it might be assumed that lower income enrollees are more prone to do without care. The Commonwealth Fund estimates that 28% of enrollees in ESI are underinsured as of 2018, and 35% of adults aged 19-64 (including the uninsured, 12% of adults) skipped needed care because of costs. That self-denial is surely concentrated at lower incomes.

As for the lower average premiums paid by lower income workers, I can imagine the following factors at work:
  • When there's a choice of plans, lower income employees choose cheaper ones.

  • While firms with higher concentrations of low income workers offer less generous insurance on average, most low income workers are not in companies with such concentrations (that's my inference - I don't know if it's true). In general, large employers offer more generous insurance than small ones. Perhaps most large companies, e.g., those with unionized work forces, don't have a high concentration of low income workers. 

  • Lower income workers are likely to have children enrolled in Medicaid or the Children's Health Insurance Program (CHIP), which together insure almost 40% of all children in the U.S.  CHIP eligibility varies by state, from 175% FPL to 405% FPL. 

  • Lower income workers are likelier to be in smaller families, both because they're younger on average and because they're likelier to be one-parent families. The discrepancy in premiums paid is much steeper in family coverage than in individual:
UPDATE: It's been brought to my attention that a growing number of employers are tiering premiums -- charging more to higher income enrollees. Per this Anthem benefits newsletter, this practice can help to a) keep lower income employees' premiums below the ACA 9.89% affordability threshold, b) offer more comprehensive benefits to higher income workers, and c) take advantage of the health insurance tax exemption's higher value at higher income levels. The tiering is also done without offering better coverage at the higher premium/higher income levels.

The main takeaway from the Kaiser-Peterson report is that Americans spend huge percentages of their income on healthcare. These figures don't include the employer contribution, which averages over 20% of compensation. But perhaps there's some cold comfort in the apparent fact that lower income workers are not on average being offered stingier deals in absolute terms.

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