Health insurance too profitable while employees struggle

KEY SUMMARY: For years, businesses have responded to rising health care costs primarily by shifting more of those costs onto their employees, through higher deductibles and other cost-sharing. The average deductible is now 212% higher than it was in 2008. Employers cover more people than any other insurer and account for about 20% of all health care spending — almost $700 billion in 2017. With rising, costs companies may decide to form their own health insurance organizations.

Most employers still rely on their insurers to negotiate the best prices, preferring to stay out the weeds themselves. But insurers are becoming increasingly vocal about the difficulty of negotiating big discounts on hospital care, as hospitals consolidate, and for new prescription drugs that don’t have any competition.

In the last 12 years, annual deductibles in job-based health plans have nearly quadrupled and now average more than $1,300. One in six Americans who get insurance through their jobs say they’ve had to make “difficult sacrifices” to pay for healthcare in the last year, including cutting back on food, moving in with friends or family, or taking extra jobs. And one in five says healthcare costs have eaten up all or most of their savings.

 56% of all U.S. adults had problems paying medical bills, delayed care or worried about affording care. Hardest hit in the cost shift are lower-income workers and those with serious medical conditions such as diabetes, heart disease and cancer — who are more than twice as likely as healthier workers, according to the Times/KFF poll, to report problems paying medical bills and to say they’ve cut back on spending for food, clothing and other household items.

As recently as 2006, nearly half of workers had a health plan with no deductible at all: Their insurance began immediately covering medical costs, often requiring them to pay, at most, a small percentage of their bills.

The average deductible for a single worker with a job-based insurance plan in 2006 was just $379, adjusted for inflation, according to an annual employer survey that KFF has conducted for more than two decades. By 2018, that figure had more than tripled to $1,350. Four in 10 U.S. workers have at least a $1,500 deductible — the threshold the poll used for high-deductible coverage for individuals.

Employers are eventually going to realize that they can form together to create their own employee health insurance and save money. CPG companies are hurting right now and if they can save money by disrupting health insurers, who are pocketing billions in profits, they are going to do it.

In addition, some employers might eventually require employees, who are overweight, to join programs that help them better manage their health, thus lowering costs.

With raises being eaten up by higher health insurance payments and deductibles the cost of health is going to be a major issue in the upcoming election. Drug costs are sure to be part of that discussion.