Deterioration in employer-sponsored health plans

Center for American Progress
March 3, 2015
The Great Cost Shift
Why Middle-Class Workers Do Not Feel the Health Care Spending Slowdown
By Topher Spiro, Maura Calsyn, Meghan O'Toole

In recent years, the growth in overall health care costs has slowed
dramatically. But for millions of Americans with employer-sponsored
insurance, or ESI, this slowdown is illusory. From 2008 through 2013,
the average annual growth rate of employees' monthly premium
contributions and out-of-pocket expenses, adjusted for inflation, was
more than double that of average annual growth in real per-capita
national health care spending, which was less than 2 percent per year.
This growth has also outpaced employers' costs of offering these
benefits by more than 40 percent.

Employees experiencing higher health care costs tend to blame the
Affordable Care Act, or ACA, even though the law largely leaves the
employer-based system alone. In fact, many employers report that the ACA
has had only a negligible influence on their health care costs.

The actual reason why employee and employer costs are increasing at
different rates is because employers have, over time, shifted greater
responsibility for health care expenses to their employees through
higher deductibles, higher copayments, and higher coinsurance — a
practice that began long before the passage of the ACA. Other employers
pay smaller shares of their employees' health care premiums.

To some degree, this long-term cost shifting has contributed to the
overall health care slowdown. Increased cost sharing discourages the use
of health care — individuals tend to spend less on their health care
when they are subjected to higher fees or deductibles — which has
lowered overall health care spending. Employees with higher cost sharing
are more likely to avoid or delay even beneficial and cost-effective
care. Employers, insurers, and public health care programs benefit from
these savings, while individual employees with significant health care
needs face greater out-of-pocket costs. Employees have increasingly
reported that their health care costs are unaffordable. In other words,
almost everyone in the health care system is realizing savings, but
employees' costs are rising.

Unlike changes to wages, which are straightforward and transparent,
these types of changes to employees' health benefits can be hard to
understand, making cost-shifting efforts difficult for employees to detect.

The Great Cost Shift (full 31 page report can be downloaded at this page):
https://www.americanprogress.org/issues/healthcare/report/2015/03/03/105777/the-great-cost-shift/

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Comment by Don McCanne

One of the most important goals of the Affordable Care Act was to
preserve the part of our health care financing system that supposedly
was working quite well: employer-sponsored insurance. However, in a
process that had already begun and has further intensified since the
beginning of ACA implementation, the coverage for employees has
deteriorated, with costs being shifted from the employer to the employee
without a commensurate increase in wages, leaving employees considerably
worse off - especially those employees with greater health care needs.

This report from the Center for American Progress provides an excellent
explanation of the mechanisms of this shift in spending from the
employer to the employee. Unfortunately, their neoliberal
recommendations for correcting this problem are grossly inadequate. Not
only would they leave in place the otherwise highly flawed model of
financing health care through a multitude of private health plans, they
would merely increase transparency of this shift that has been taking
place, while increasing administrative complexity by requiring employers
to return half of the savings to the employee, and, yes, they would
throw in three free primary care visits per year - big deal!

This problem is serious and requires truly transformative change.
Instead of allowing employers to continue to implement their current
agenda of introducing further relatively opaque changes that will
compound the deterioration of the effectiveness of their health plans,
we should terminate these plans and replace them with a far more
efficient, equitable, and effective single payer national health program.

A single payer system would end employers' concerns about excessive
increases in health care costs, not to mention relieving them altogether
from the need to maintain a health benefit program. Much more
importantly, it would ensure truly affordable, reasonably comprehensive
health care benefits not only for all of their employees, but for
everyone else in the nation as well.