While politicians have been embroiled in a fiery debate over President Obama's signature health-care law, a quiet but profound shift is fundamentally reshaping how health insurance works for the roughly 155 million Americans who receive coverage through their employers.
A national survey of employer health benefits released Wednesday shows how much deductibles — the health-care costs that people must pay out of their own pockets before insurance kicks in — have shot up. In 2016, 4 in 5 workers had a deductible as part of their individual coverage, averaging $1,478. During the past five years, deductibles have grown 10 times as fast as inflation and nearly six times as fast as wages, according to the new report.
For the first time, employer-sponsored health plans also reached a new benchmark: Half of all workers who receive insurance through their employers faced a deductible of at least $1,000 a year for individual coverage — up from just 10 percent of workers in 2006, according to the survey by the Kaiser Family Foundation and Health Research & Educational Trust. The average deductible for individuals in firms with fewer than 200 employees is $2,069.
"We've been so fixated on the Affordable Care Act, we've missed a gradual sea change in what health insurance is for most Americans," said Drew Altman, president of the Kaiser Family Foundation. "It's why, if we were ever to tell an average person that we’re living in a period of historic moderation in health-care costs, they would probably think we’re out of our minds — because what they pay out of pocket has been going up over time. ... That’s kind of the pain index for people."
The Affordable Care Act included a cap on out-of-pocket spending for plans sold through the marketplaces and on the employer market. There has been a furor over the premium hikes and the stability of the marketplaces, where roughly 11 million Americans receive coverage. But far less attention has been paid to how deductibles are shaping the spending — and health — of the large number of Americans with employer-based insurance.
Reining in health-care expenditures has become a major issue for large and small employers. The Kaiser data shows that while premium increases have moderated -- with family premiums growing an average of three percent last year -- many employers have increased their use of high-deductible plans, and the deductibles themselves have also skyrocketed. The effect of those high deductibles is mediated in some plans by employer contributions to health savings accounts. For example, once the employer contributions are taken into account, the proportion of workers facing at least a $1,000 deductible for single coverage drops from half to 38 percent.
Tom Delaney, senior manager of benefits for Epiq Systems, a Kansas City, Kan.-based firm that provides software engineering and development for the legal industry, said that in 2014 the company introduced a high-deductible plan alongside its more traditional offering. The new plan has an individual deductible of $1,500, with an out-of-pocket maximum of $3,000, and he said that more than a third of the company's roughly 1,500 U.S. employees switched over — more than expected.
The appeal is that the employee's share of the premiums are less for this plan -- about $145 a month, vs. $200 a month on the more traditional option. But the company also wanted to incentivize employees to stay well. Epiq Systems, therefore, offers a $50 monthly discount to people in both plans if they participate in a wellness program that rewards people who take actions such as completing an on-site health screening, a coaching call with a nurse practitioner to review health history and a health risk assessment. Delaney said about two-thirds of the employees participate in the wellness program, which has been offered for three years.
"I actually think the bigger picture is learning how to be better consumers and better purchasers of health care," he said, "just like when we got to the store, you look for the best sales, the best deals, the best quality — and you put that all together in terms of how we access health care."
What do these new plans mean?
A separate study released earlier this week found a markedly different pattern of health-care use between people on high-deductible plans, compared with traditional plans. That study by the Health Care Cost Institute, a nonprofit research organization, examined insurance-claims data from people covered by employer-sponsored insurance plans between 2010 and 2014. Over that five-year period, people on the high-deductible plans, also called consumer-driven health plans, used 10 percent fewer health-care services. But despite using fewer medical services overall, they personally paid more out-of-pocket costs each year. People on the high-deductible plans spent an average of $1,030 out of pocket on health care, vs. $687 by people in more traditional plans.
The idea behind these high-deductible plans is what economists call "skin in the game." The hope is that people will cut back on unnecessary care if they are on the hook for more of the costs. But it's unclear whether the deductibles simply prompt people to cut back on care across the board or to eliminate truly unnecessary tests, doctor visits and medication.
"In terms of watching for the future, I think we can see this lower utilization trend," said Amanda Frost, a senior researcher at the Health Care Cost Institute. "But given how new all of this is — the new prevalence of these plans, the newly identified reduction-in-service-use trend — I think it’s going to be interesting to watch and see what the health implications of this are."
What employers are grappling with is how to rein in spending, which is increasing both for employers and employees. One way to do that is to shift some of the cost to employees.
At Civitan International, a Birmingham, Ala., nonprofit that operates civic clubs aimed at helping individuals with disabilities, health-care costs have more than doubled over the past decade, according to Tom Stoves, director of finance. Every year, the board of the small, 15-person firm debates whether and how much of that cost to pass on to its employees.
About three or four years ago, Stoves said, Civitan shifted the balance so that employees paid 20 percent of the premium, instead of just 6 percent. He noted the plan is still quite generous compared with many other plans in the area; the monthly premium for an individual is $106.
Stoves said that the deductible rose 10 percent this past year, to $2,000 for an individual plan in 2016. To help defray the costs of that deductible, the company offers a supplemental benefit to people once they have paid the first $500 of their deductibles, allowing them to receive up to $750 toward deductible payments.
Health care "is definitely growing, and it’s growing faster than some of our other line items of expenses," Stoves said. "Our board is pretty appreciative of the employee that we have ... and they want to provide this benefit as long as they can. For the employees, it's a good morale boost to have reasonable health-care costs."
Correction: A previous version of the story incorrectly said there was no cap on out-of-pocket spending on the employer market.