Health Insurance

America’s Employer-led Health Insurance System is Falling Short, Survey Suggests



A new survey by the Commonwealth Fund found that America’s health care system is not comprehensive enough, even for those able to obtain health insurance through their employer.

Based on 6,301 respondents, the Commonwealth Fund found that 29% of people with employer-sponsored health coverage and 44% of those who purchased coverage through the individual market and ACA marketplaces were underinsured.

“The underlying cost of care is really high,” Matthew Fiedler, a senior fellow at the USC-Brookings Schaeffer Initiative for Health Policy, told Yahoo Finance. “So coverage is expensive and employers are finding ways to keep costs down… a dollar [an enrollee] spends on health benefits is a dollar they can’t spend on wages.”

The Commonwealth Fund defined someone as underinsured if their out-of-pocket costs over the prior 12 months, excluding premiums, were equal to 10% or more of household income; out-of-pocket costs over the prior 12 months, excluding premiums, were equal to 5% or more of household income for individuals living under 200% of the federal poverty level; or if their deductible constituted 5% or more of their household income.

“Overall coverage is at a record high, but our report finds that having health insurance is not enough to protect millions of Americans from high medical costs that are burdening them with bills they cannot pay or debt they’re working to pay off,” David Blumenthal, president at the Commonwealth Fund, told reporters on a press call. “The results spotlight how growing health care costs, particularly for hospital in-patient and outpatient services, are squeezing Americans whose insurance does not provide adequate financial protection.”

‘The underlying care of care is really high’

Unsurprisingly, lower-income individuals with employer-sponsored coverage were underinsured at higher rates than those with higher incomes. Those with health problems also were at higher risk of being underinsured.

“If you’re an employer with a relatively low-income workforce where cash wages are potentially particularly valuable to those enrollees because they’re struggling to make their budgets work,” Fiedler said, “those employers may respond to the actual wishes of their workforce by offering relatively skimpy health benefits and somewhat higher wages.”

While the Affordable Care Act (ACA), commonly known as Obamacare, may seem like a viable alternative, the Commonwealth Fund survey showed that those enrollees are struggling as well. Not only were 44% underinsured, but many live in the 12 states that have yet to expand Medicaid, leaving them in the coverage gap with no access to affordable, federally subsidized coverage.

The coronavirus pandemic led to enhanced marketplace subsidies and helped drive up enrollment in both the ACA marketplace and Medicaid. Many of those policies, however, are temporary and could leave many individuals uninsured or underinsured once they run out.

“There is more work to be done to cover the remaining uninsured, and there are near-term risks of large Medicaid enrollment losses at the end of the public health emergency that could drive up the number of uninsured,” Sara Collins, vice president for health care coverage and access at the Commonwealth Fund, said on the press call. “The survey highlights the major challenge ahead on coverage in the U.S., which is that many people have health insurance that is failing to provide them with timely access to health care and economic security.”

Driving up medical debt

These flaws in the health care system are some of the driving factors behind America’s growing medical debt issue.

According to the Consumer Financial Protection Bureau (CFPB), as of June 2021, Americans held $88 billion in medical debt on consumer credit records, with most individual debts under $500. Medical debt is the most common debt collection at 58% with the second-most common one being telecommunications at just 15%.

“When we talk about medical debt, we talk about people who are uninsured,” Fiedler said. “But it’s certainly the case that some people who are insured, some people who are in a plan with a large deductible, may need care and then find they can’t meet their deductible.”

For those with employer-sponsored health coverage, the average deductible was $1,434 in 2021 while the maximum out-of-pocket cost was an average $4,272. Individuals on marketplace plans paid an average $2,825 for deductibles and up to $8,700 for out-of-pocket costs.

The survey also found that half of respondents would not have the money to cover an unexpected $1,000 medical bill within the next 30 days, with even higher numbers for communities of color: 69% for Black adults and 63% for Latino/Hispanic adults.

“The cost problem in the United States is endemic, long-standing, and incredibly difficult to address,” Collins said. “It is special to the United States.”

Collins offered two possible solutions: regulating prices and competition driving down prices.

“We have no evidence yet that consumers pick care based on price, even when they are underinsured,” she said. “They tend not to shop based on the price, but nevertheless, there’s a lot of momentum behind the idea and the observation that there’s enormous amount of consolidation on the provider side among hospitals and among systems.”


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