Trends in Consumer Costs Related to Health Care Coverage

We are familiar with the constant headlines about consumer concern over the cost of their health care and health care coverage.  The Kaiser Family Foundation and the Peterson Foundation, via the Peterson-Kaiser Health System Tracker, put some numbers behind this concern, analyzing 15 years of changes in family health spending, from 2003 to 2018.   (KFF Brief)   Using data from a large commercial health plan analytics vendor, the authors looked at both the premium contributions made by workers to their health plan and at cost-sharing payments made for health services, which have increasingly included large deductibles.  In 2018, the average family had $4706 in premium contributions and $3020 in service cost-sharing, or over $7700 in total health spending in 2018.  This was up 18% from the same amount five years earlier, $6570; and up 67% from 2008.  In the same time period, employers’ premium portion has risen 51%, from $10,000 to $15,150.  While employees appear to have shouldered more of the burden over this time period, in the most recent years, employers have actually seen a faster increase in their share of health costs than have workers.  But at an absolute level, employees feel much more financial stress, as average out-of-pocket spending has risen 58% in a decade, more than double the increase in wage growth.  Total premiums for health coverage have increased 55% in the last decade, but average cost-sharing has risen by 70%, so employees are feeling more pain through cost-sharing than premium contributions, which tend to be less visible in any event, since they are deducted from paychecks.  In the same time period, wages increased an average of 26%, so health costs are consuming more of a worker’s pay, and the employer portion of the premiums in essence substitutes for wages that otherwise would be paid to the employee.

As a portion of the service cost-sharing, deductibles have risen rapidly while copayments have declined.  Deductibles were only 20% of out-of-pocket cost-sharing in 2003 but rose to 51% in 2017, while copayments went from 54% to only 19%.  Coinsurance was relatively flat, increasing slightly from 26% to 30% in this time period.  Interestingly, when looked at on a service category basis, insurance is paying about the same portion, 93%, of a patient’s inpatient costs in 2017 as it was in 2003, but for prescription drugs, the health plans cover about 89% of the cost now compared to only 79% in 2003, while for outpatient services, insurance paid only about 81% in 2017 compared to 86% in 2003.  Overall, the report buttresses the now-familiar story that health spending growth has caused financial pain for everyone, but particularly for middle-income workers, who have the least resources to handle the increased cost.