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Why employees feel so pinched by health-care costs

(Washington Post illustration; iStock)

The growth in employees’ share of health-care premiums and deductibles has slowed over the past decade, but their incomes have lagged behind, according to a new study.

The slower increase in premiums reflects a nationwide trend in health expenses. But the shift hasn’t felt like a reprieve to many people because the growth of deductibles hasn’t abated as much and their incomes haven’t kept up.

Families that receive insurance through their employer spent, on average, 6.5 percent of their income on premiums and deductibles in 2006, according to the study by the nonpartisan Commonwealth Fund. By 2015, those expenditures grew to 10.1 percent of income.

Those health care costs were acutely felt in regions of the country where incomes are below the national average, such as the southern and southeastern states.

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The study comes amid intense scrutiny of rising premiums in the insurance marketplaces set up by the Affordable Care Act, President Obama’s signature health-care law that offers coverage for people without employer-sponsored insurance. Government figures released this week showed premiums will increase an average of 25 percent next year for certain plans offered through the Affordable Care Act health-insurance marketplaces.

At his Doral resort in Florida on Tuesday, Republican presidential nominee Donald Trump attacked the Affordable Care Act, stating that it was adversely affecting the employees of his golf course. The statement was confusing since the vast majority of the employees at Trump Doral receive health care coverage through their employer. And the Commonwealth Fund report suggests out-of-pocket costs for employer-based insurance plans aren’t rising so fast.

In fact, the growth in health-insurance premiums and deductibles has moderated since the Affordable Care Act was passed, a trend the authors attribute to a nationwide slowdown in health care costs. About 10.4 million Americans had health insurance through the Affordable Care Act exchanges in the first half of the year, and about 154 million use coverage through their employer or a relative’s employer.

“The focus really has been on the marketplaces … and a lot less focus on the employer group market, which is where most people get their coverage in the United States,” said Sara R. Collins, vice president of health-care coverage and access for the Commonwealth Fund and an author of the report. “I think there was an anticipation that the new requirements for employers was going to lead to spikes in premiums in the employer group market” — something that the new data show has not happened.

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Under the law, certain employers, depending on their size, are required to offer insurance to full-time employees — and they must offer plans that meet new coverage requirements. Employers also have been preparing for the Cadillac Tax, which will impose a tax on high-cost insurance plans.

People have felt increasingly pressured by rising premiums and deductibles, with a majority of registered voters saying it is “very important” for the next president to address the health care law and costs, according to a Kaiser Family Foundation tracking poll in September.

The Commonwealth Fund study suggests the root cause for that growing pressure is because incomes haven’t grown as fast as health-care costs.
States in which employees shelled out large portions of their paychecks for health-care costs tended to have lower incomes.

In Florida, for instance, the average total premium for a family was $16,000 per year, whereas in Massachusetts, it was more than $18,000. But the average employee premium was less in Massachusetts, and it made up a smaller percentage of the average income, meaning workers carried less of the burden: In Florida, the median income was $48,501, whereas in Massachusetts it was $73,015. That meant the combined premium and deductible was far lower as a percentage of median income.