The effect of high-deductible health plans on inequality
Anyone with a high-deductible health care plan understands the dynamic: when access to health care costs more for people, they’ll think twice about using it. It is a system designed to contain costs by discouraging service.
But there is something even more insidious in such plans. For low-income California families already living paycheck to paycheck, a single medical need can push them deeper into financial peril. This type of health care keeps the poor in poverty.
That’s precisely what worries Malissa Sanchez, whose Los Angeles employer essentially forced her into a high-deductible health plan (HDHP) in April when it eliminated a direct-pay system that previously allowed her to buy its own cover.
“The new plan just isn’t as good,” said Sanchez, 30. “I am very concerned that they are implementing it now, when we can least afford it. I go back and forth between being worried and angry.
Throughout California and across the country, HDHPs are growing in popularity with employers. Whether offered on its own or as one of many choices for covered workers, an HDHP requires patients to pay 100% of their medical costs up to a set limit before an “insurance” kicks in. , regardless of their contribution to the plan premiums. The IRS defines a high-deductible plan as one that costs an individual $1,400 or more per year ($2,800 for a family) before an insurer starts paying one of the tabs.
However, this is certainly not the end of the costs for the patient. Once a deductible is reached, workers in most company health insurance plans are still responsible for a percentage of their future bills (euphemistically called “coinsurance”) until a annual limit – often $3,000 or more for an individual or double that for a family – has been reached.
Because high-deductible plans typically have lower monthly premiums, they’re being touted as affordable options for cash-strapped workers — and they can be for those who rarely or never use them and can afford them. huge and sudden payouts if they do. By and large, though, it’s the companies that save, paying some or all of the reduced premiums and then watching employees absorb the upfront cost of health care.
This cost can be exorbitant. In his employer health benefits 2021 surveythe Kaiser Family Foundation (KFF) found that the average annual deductible for a covered single worker is $1,699 – a figure that has been rising 68% during the last decade. For those working in small businesses, the bite is even bigger: $2,379 deductible paid before any insurance. In most cases, this is in addition to monthly premiums, copayments and coinsurance.
“What companies can say to their employees is, ‘Listen, we can give you a lower premium if you take the high-deductible health plan,'” Atul Gupta, professor of healthcare management at the Wharton School, mentioned trend a few years ago. “And if you are relatively healthy, you will also be better off. But if you expect to use a reasonable amount of care, these plans get quite expensive.
Industry experts told Capital & Main that it has become common for workers to be covered by plans with annual deductibles of $3,000 or more for an individual and perhaps double that for a family. These are unsustainable numbers for many Americans, but they would almost immediately bankrupt a low-income person.
For several years, Malissa Sanchez had found a way to continue. A catering worker for airline catering giant LSG Sky Chefs at Los Angeles International Airport, Sanchez relied on a city rule and the Affordable Care Act to get by.
Under a living wage ordinance issued by the city of Los Angeles, which allows contractors to do business at LAX, airport employees must be paid a specific hourly rate plus enough money to buy health insurance if the employer doesn’t offer a premium-free plan. In 2022, the hourly wage is $17, plus a health care differential of $5.67 per hour. The order requires employers to either spend the full $5.67 — per worker, per hour — directly on a premium-free plan, or pay workers that amount and let them buy their own.
For Sanchez, the health care differential equaled more than $900 a month in additional income. By using the California covered exchange, she said she was able to purchase subsidized coverage for herself and her husband for $168 a month, with their young daughter covered by Medi-Cal. The difference, she said, allowed her to pay much of the $800 a month she spends on daycare while she works.
In April, however, Sky Chefs rolled out a new corporate plan, under which employees pay no premium for themselves, but up to $600 a month if they wish to include family. They are also liable for a $1,500 single deductible and a $3,000 family deductible, plus 20% coinsurance and copayments.
In doing so, Sky Chefs canceled its $5.67 hourly payment for health care to its workers, which is more than $10,000 a year in income. Workers no longer have the option of purchasing their own plans with a wage differential.
“I haven’t seen another employer do this, and I don’t know why any employer would want to do this, because it’s the kind of move that’s very unpopular with workers,” policy director James Elmendorf said. at Los Angeles. Alliance for a New Economy. “It’s rare for an employer to raise wages and then lower them.”
In response to a series of questions from Capital & Main, Sky Chefs provided a statement through a public relations firm which read in part: “We are pleased to provide all of our employees at LAX with coverage of health care with a premium-free supplement. This co-pay healthcare plan will allow our associates to have access to a qualified healthcare plan without having to worry about paying premiums… Since we offer premium-free coverage to all of our LAX employees, we have removed the hourly supplement.
Asked for a second time to answer specific questions, the PR firm reiterated that the new plan was in line with the living wage order and said Sky Chefs would have no further comment.
Sanchez’s union, UNITE HERE Local 11, protested the sudden change in policy, in part because it was not collectively bargained. Union leaders note that most of their Sky Chefs employees at LAX were taking the extra $5.67 an hour and buying their own insurance. (Disclosure: UNITE HERE Local 11 is a financial backer of Capital & Main.)
A fair question is what Sky Chefs get for their money. “That’s an astronomical amount for a company to spend on a health plan that isn’t good, or has a high deductible or copayment,” Elmendorf said. “That’s the whole reason for the $5.67 figure: it’s considered to be roughly the amount per hour, per worker, it would take to pay for a really good health plan without a family.”
“I don’t know why they’re putting in place a plan that’s clearly not free family insurance if they’re not paying the (workers) anymore, and that’s not the intent of the order,” added Elmendorf. “The city would be right to ask about this, and maybe ask specifically if the full $5.67 is being spent on health care. I don’t know if that’s the case or not, but it’s a question worth asking.
There is no indication that Los Angeles officials are questioning the new plan.
This type of cost borne by workers, which is rising rapidly, increases income inequality. In a 2018 study published in the American Journal of Public Health, researchers found that medical spending has actually pushed millions of Americans into — or further — into poverty. The study included 7 million people who earned at least 150% of the federal poverty level, but were pushed below that line once their medical costs were taken into account.
Nonetheless, corporations and health insurance behemoths love HDHPs — and you only have to look at the pandemic to see why. During the worst of the first waves of COVID in 2020, large numbers of Americans stayed away from hospitals, doctors and dental offices, many of them fearful of contracting the virus. Result: Insurance Companies made huge profits. When companies collect premiums but patients avoid using the system – for whatever reason – insurers win.
According to Bureau of Labor Statistics. Various reports now put this figure at between 50% and 53%. The KFF surveymeanwhile, found that nearly 30% of company-covered workers are currently enrolled in a plan with an annual deductible of at least $2,000.
For so many low-income workers, it’s a razor’s edge. Malissa Sanchez and her family are among the 35% of Americans who, according to the Federal Reserve, cannot cover a $400 emergency of any kind without going into debt or selling anything. In other words, she now has a company health plan that she won’t want to use.
“It’s going to hurt us a lot,” she said. “It’s just ridiculous. We’ve been loyal to them, but they don’t care about working families. What interests them is business.
This article was originally published on Capital and principal.