13M Americans spent 10% of income on insurance premiums in 2016-17: study

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Many Americans spending upward of 10% of their income on out-of-pocket health insurance costs. (Getty Images)

Healthcare costs are consuming a large share of income for many Americans, according to a new study.

Researchers at the Commonwealth Fund examined out-of-pocket spending totals for people with private health insurance and found a large portion of the country was spending 10% or more of their household income on insurance costs.
 
The report examined U.S. census data between 2016 and 2017 and found that 13.3 million people spent 10% or more of their incomes on premiums. Another 6.2 million people spent 10% or more of their income on out-of-pocket costs. Combined, 4.1 million people were faced with high premiums and high out-of-pocket costs relative to their income.

The average household spent $2,200 annually on insurance premiums, while some spent more than $8,000. And while the median out-of-pocket expenses were $800, some families spent more than $5,000 annually. Combined, the median out-of-pocket cost for an American was $3,700. Still, some households spent as much as $12,080.

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“It is striking to see the number of people with employer plans—nearly 24 million—who were living in households that spent a large share of their income on premiums, out-of-pocket expenses, or both,” Susan Hayes, a senior researcher at the fund, told FierceHealthcare. “It is also striking to see the vast range of dollar amounts (from zero to several thousand) that families, all of whom have employer coverage, spent on premium contributions and out-of-pocket costs. Costs for employer coverage are not experienced equally, whether across the country or within the same state.”

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Geography was a large factor in how much of income was spent on healthcare. In large, incomes tend to be lower in the South and West, meaning a substantial portion of income was more likely spent on healthcare.

Specifically, Arkansas, Florida, Louisiana, Maine, Mississippi, Nevada, North Carolina and South Dakota had the largest percentages of people who spent at least 10% of their income on premium contributions. On the flip side, Alaska, the District of Columbia, Hawaii, Kansas, Oregon, Montana, Minnesota, New York, Rhode Island and Washington had the smallest pool of people who spent at least 10% of their income on insurance premiums.

The states with the highest shares of people with high out-of-pocket costs include Arizona, Arkansas, Idaho, Nebraska, North Carolina, Oregon, Utah and Wyoming.

Total spending on premiums and out-of-pocket was lowest for people in Hawaii, about $1,500 a year, and was highest for people in South Dakota, around $5,450.

Hayes notes that while this analysis did not look at trends over time, other studies show that incomes are not growing as fast as healthcare costs. In fact, a previous analysis by two of the authors of this brief found that the amount that employees contributed toward premiums for their employer coverage grew faster than median income nationally and in most states between 2008 and 2017. 

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“Income growth is failing to keep pace with health care cost growth, leaving millions of people in employer plans with unaffordable premiums, out-of-pocket costs, or both. This makes it harder for people to maintain their coverage and get the health care they need. Even small policy steps have the potential to make health insurance and health care more affordable for U.S. families,” Sara Collins, co-author of the study and vice president for healthcare coverage and access at the Commonwealth Fund, said in a statement.

Authors of the study suggest several policy options to reduce these costs for people with employer coverage.

One suggestion is to fix the family coverage glitch, which bases affordability and access on a single-person plan rather than a higher-cost family policy. Another suggestion is to raise the portion of medical costs that an employer plan is required to cover. And to implement this plan, employers could be penalized for not meeting the standards.

Moving forward, Hayes said it would be interesting to look at the trend over time to see the extent to which the amount workers report spending on care for themselves and their families has changed.

"But these data and other analyses make clear what many families already know first-hand: that millions of people with employer coverage have unaffordable premiums, out of pocket costs, or both," she added.

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