Low-income families spend greater share of income on private insurance

Lower-income families with employer-based insurance spend a greater share of their income on healthcare expenses than those with higher incomes, according to new research.

The study also suggests the status of family members’ health is directly related to annual out-of-pocket expenses. 

According to a study published in Health System Tracker developed by The Peterson Center on Healthcare and the Kaiser Family Foundation (KFF), families with employer-based insurance and the lowest incomes spend around 14% of their annual pay on health-related expenses. 

The Annual Social and Economic Supplement to the Current Population Survey began collecting information on out-of-pocket payments for premiums and medical care in 2011. Excluding the elderly and those people with other types of insurance coverage, more than 101 million people have employer-sponsored health insurance. Within that demographic, more than 8 million people earn less than twice the poverty level, and almost 29 million people have incomes between 200% and 400% of poverty. 

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Looking specifically at 2017 data, families with incomes below twice the poverty level paid, on average, 14% of their annual income toward health insurance premiums or medical care, compared to 8% for people in families with incomes between 200% and 400% of poverty, and 5% for people with incomes of 400% of the poverty level or more.  

And out-of-pocket payments were an even larger percentage of income for families with a sick member. Looking at any income level, people who have or live with someone who has fair or poor health, expenses are between 30% and 60% higher than those living in good health. 

While the Affordable Care Act (ACA) includes subsidies for lower-income people who are enrolled in exchange plans, there is not similar protection for families insured through employer plans. 

RELATED: Americans with employer-sponsored insurance are spending more on healthcare, despite using less

In fact, the coverage requirement for an employee-based plan is less than 9.86% of a family’s income. And many employer plans have similar costs and coverages for people across the income spectrum. So, while the out-of-pocket costs might be affordable with the half of enrollees that have incomes above 400% of the poverty level, it is probably not the case for others with low or moderate incomes.  

“The underlying problem is that people are getting low wages and aren’t making enough money to be valuable enough to employers so that they could get a generous benefits package,” Gary Claxton, a vice president at KFF, told FierceHealthcare. Claxton notes that the average cost of family healthcare is between $15,000 and $18,000, which equates to the annual pay for minimum wage. 

Larger employers are by law required to offer employees medical benefits of some sort, to meet the standard ACA requirements. If an employer offers a health insurance package and the employee turns it down, he or she is not eligible for a premium tax credit return.  

Claxton notes that as the economy has gotten stronger, the falling off of employees who can afford health insurance has most likely leveled off. 

“But if costs go up again or the economy cools, we’ll see more, lower wage people continuing to have a hard time affording to stay with employer coverage,” he said