The Rising Cost of Insurance and Affordability for Healthcare

Healthcare News

The Rising Cost of Insurance and Affordability for Healthcare

Health Insurance
Bre D’Alessio South
By Bre D’Alessio South
Aug 27, 2019
Person in hospital gown hanging feet off the end of a hospital exam table

The number of people without insurance continues to rise as trends for 2020 forecast higher overall costs in health care.

The Centers for Disease Control and Prevention (CDC) reports there has been a steady increase in those without insurance for the last two years. In a recent survey, 30.4 million Americans went without insurance in 2018.

A notable reason for this increase was due to the Tax Cuts and Job Act, established in 2017, which made changes to how taxes are filed for those uninsured. Previously, if an individual was not enrolled in health insurance coverage, they were penalized and paid during tax season. This penalty fee ushered individuals to obtain insurance, if not available through an employer, then through the Affordable Care Act (ACA). The fee labeled Shared Responsibility Payment ran through the 2018 tax season, but in 2019 was removed from federal tax return filings.

For employees on private health insurance plans, either through ACA or employer insurance, the standard rate of these plans is expected to rise in 2020. The rise of premiums alongside out of pocket costs is due to the general increase in health care costs.

For a family covered by a large employer’s health insurance, the average cost last year for an employer was $22,885. While employers contributed about $15,000, employees paid over $4,000 for premiums and $3,000 in out of pocket expenses.

Why are premiums rising?

Government policy is one reason. Medicare and Medicaid were both signed into law in 1965. Medicare was created to help those over the age of 65, while Medicaid was established to provide medical insurance to those actively receiving cash assistance. Medicaid has grown to include low-income families, pregnant women, any individual with a disability, and those who need long-term care for their medical health.

Both programs have continued to either grow or make amendments since 1965 and can vary based on state. (A helpful way to remember the difference between the two: Medicare was formed to ‘care for the elderly,’ and Medicaid was created to ‘aid the poor’.)

As cost of living and access to health care costs rise, so has the need to increase Medicare and Medicaid prices in order to balance the costs. The U.S. population is continuing to grow, which includes seniors opting in for Medicaid, and as a result, these government-funded programs are increasing in demand for services.

More baby boomers are aging out of employer insurance and signing up for government assistance coverage; in 2020, retired baby boomers will more than double costs for both Medicare and Medicaid.

However, it’s not just government policy that has increased the rise of premiums. Health care costs overall have grown significantly. Health care spending in the U.S. increased 3.9% in 2017, which calculates to $3.5 trillion, and of those total costs,32.7% of that cost was spent in hospital care.

Managing a chronic condition adds to the monthly—and sometimes weekly—costs patients are faced with as medical bills stack up. Diabetes is reported as the most expensive chronic condition to manage, and in response, an alarming amount of diabetics are either not taking the recommended dosage of insulin instructed by their providers or not treating their diabetes altogether.

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In a recent survey by the CDC, In 2018, more than one in 10 Americans were diagnosed with diabetes, and 13.2% of them opted to not take their medication as prescribed to curb prescription medication costs. Additionally, 24.4% asked their provider for a cheaper drug option.

Health insurance premiums continue to inflate while wages are staying flat:

As the trend for overall health care costs continues to rise, the main concern for those under employer insurance (or private health insurance) is the rise of premiums. The balance between salaries and health care costs are imbalanced.

Sara Collins, Vice President of The Commonwealth Fund, testified in front of the U.S. House of Representatives in February while armed with data supporting the research around families and today’s health care insurance landscape. In her testimony, she spoke of the imbalance between rising costs and household income: “Families’ costs for employer health insurance are rising faster than the median income. Moreover, even as costs climb, families aren’t receiving higher-quality insurance. The amount they have to spend out of pocket before their insurance coverage kicks in also continues to climb.”

Collins’ research also included that those with employer coverage are facing such a high amount of out of pocket costs and deductibles in relation to their income, “that they can be considered uninsured [at this point].”

In a recent report by Peterson-Keiser, the average health spending of a family on their employer’s insurance has increased two-times faster than workers’ wages.

For those with high medical bills, whether insured or uninsured, deciding to pay for needed medication to manage a condition like diabetes or scheduling a medical appointment becomes a toss-up. A study by Kelton Global for RxSaver*, showed only 14% of Americans say they plan extensively in advance for possible medical expenses. The word “possible” makes it easier to keep it out of mind and ignore.

In the same study by Kelton Global, it was discovered that nearly three in four (74%) have elected to pay for groceries rather than prescription medication, while around half have done the same for electricity or gas. In addition, Truven Health Analytics reported 67% of unfilled prescriptions are due to cost.

Out of pocket costs are becoming unaffordable:

The assumption that employer insurance helps Americans save on health care costs doesn’t hold up when it comes to out of pocket costs employees are facing. Out of pocket cost refers to what an employee pays out of their personal cost reserves. These costs aren’t reimbursed by insurance and typically include deductibles, coinsurance or copayments. Because out of pocket costs rely on the individual to pay the cost upfront, with their own funds, the chances of them prioritizing these costs are minimal.

Because the individual is responsible for paying the bill, they might factor the cost as low priority when it comes to other essentials like paying off a mortgage, rent or groceries.

There is also a discrepancy between median incomes and insurance coverage. People are not experiencing the same health care costs across the board. Collins notes in her February testimony, “This variation stems from differences in the size of employer premiums across states, how much employees are required to contribute to premiums, deductible amounts, and the widening disparity in median incomes across the country.”

Commonwealth discovered through their initial research that families who could possibly spend the majority of their income on health care costs were primarily located in the South.

Free tools like RxSaver shine a light on price transparency. RxSaver was designed to offer discount coupons for prescription medications for a patient to search before they head to the pharmacy. The coupons also direct the individual to their nearest pharmacy and help ease the sticker shock of prescription pricing that’s all too common at the pharmacy counter.

In a world where we have access to knowing what we’ll pay for our gas or groceries before we leave our house, an area where we are ultimately blinded until the actual point of sale is our prescription medication cost.

How employers are responding:

The conversation around health care affordability in 2020 is only beginning. Specifically, larger employers are currently looking at possible solutions to combat the rising costs projected for next year.

According to the National Business Group on Health, health benefit costs are expected to top $15,000 per employee. One way to combat pricing is by utilizing virtual health as a resource versus an in-person patient appointment. Virtual health care is a component of telehealth, so don’t be surprised if an employer references only virtual health care and not telehealth as a whole.

Large employers are also looking for stronger strategies around high-cost claims and managing drug prescription costs. A big component of the prescription drug conversation is around specialty drugs like PrEP, drugs that come with a higher price tag.

For those not nestled under a comfortable insurance plan from their insurance, have to look to alternatives for access to care, especially when it comes to specialty drugs.

For Matthew, a Quality Compliance Manager for a mental health nonprofit in Chicago, he relies on Gilead’s copay medical assistance program for his monthly access to PrEP. “If I didn’t have an assistance program to lean on, there would be no way to justify the cost. My monthly salary wouldn’t be able to cover the out of pocket costs.”

Gilead recently announced it would have a generic version of PrEP available by September 2020.

But what about small business owners and their employees?

While large employers are strategically keeping the conversation top of mind, smaller employers are forced to grapple with the same concerns and not as big of a budget to pull from.

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More than six in 10 small businesses offer health care coverage to help attract and retain top talent, but are openly concerned about the growing costs for health care and keeping their employees on payroll.

Employee wellness and preventative health care are two of the main perks employees are looking for in a job and are a key investment in attracting and retaining top talent,” explains Jared Weitz of United Capital Source, Inc. Weitz is CEO and Founder of United Capital Source and currently has 20 employees on payroll. Their benefits include full medical, short-term disability and a 401(k) option.

While the repeal of the tax penalty for those uninsured might help some small businesses feel more comfortable in not offering benefits, most business owners want to offer some type of health care coverage to maintain the health and general care of their employees.

Weitz notes a bottom line is also top of mind but only to an extent: “Yes the rules make it so that it’s an additional financial hit to a business’s bottom line, but it will increase morale and produce a better employee if they know their health insurance is covered. Each business depending upon size, profitability, and moral values will have to decide what works best for them.”

Beyond policy, how we need to look at health care for 2020 and beyond:

Medical decisions and the influx of health care information is constantly flooding already overwhelmed families to the point that some employers are looking to introduce ‘support and claims assistance’ programs to help employees navigate the confusing and complex health care system. Programs like this would be especially helpful to those managing a chronic condition and need someone to advocate on their behalf.

This type of advocacy is also crossing over when it comes to payment of medical bills. In response to unexpected medical emergencies, or “surprise billing,” employers are looking to offer a support center for claims assistance for when these situations arise.

Policy takes up the majority of the front seat when it comes to conversations around the future of health care. But as Collins pointed out previously, there needs to be a firm handle on the initial drivers of health care costs in order to make a change around lowering the growth rate for premium and out of pocket costs.

Drivers around health care costs include: population growth, aging, disease prevalence or incidence, service utilization and service price, and intensity.

As health care costs continue to rise so will the amount of money employees pay for out of pocket costs, and with a projected 1.04% increase in population over the next year, it’s clear the cost around health care will only continue to grow.

*The RetailMeNot Q2 PR + RxSaver 2019 Survey was conducted between May 13 May 17, 2019, among 1,059 Americans ages 18+

Bre D’Alessio South

Bre D’Alessio South

Bre D’Alessio South is the content marketing manager and managing editor of RxSaver. Her writing focuses on health care, mental health, and gender rights. At RxSaver, she also serves as co-lead for the employee resource group caRe, which focuses on mental health and chronic health support in the workplace.

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