Rising health care costs reduce the availability of and enrollment in employment-based private health insurance, and the financial protection provided by it, especially for middle class families.
Understanding the consequences of rising health care costs on employment-based private health insurance is particularly important because this is how the majority of Americans obtain health insurance coverage. And most importantly, this continues to be at the core of reform efforts that aim to expand insurance and improve access. For example, the Patient Protection and Affordable Care Act will impose a $2000 per employee tax penalty on employers with over 50 employees who do not offer health insurance to their full-time workers. The law will also offer small employers new ways to access insurance for their employees through health care tax credits and insurance exchanges.
This study provides new insight into how rising health costs affect the employment-based private health insurance system. It is the first work to show directly the strong relationship between market-level increases in medical care costs and increases in a family's financial risk due to health care spending.
- Families' likelihood of receiving an employment-based private health insurance offer decreases as health care costs increase. This is most significant among low and middle income families. These findings suggest that controlling health care costs overall may be essential to maintaining the role of employer-based private insurance in the health care system.
- Families' enrollment in employment-based private health insurance decreases as health care costs increase, most significantly for middle income families. Rising health care costs have a smaller effect on lower income families' rates of enrollment in employment-based private health insurance because of the higher percentage of these families enrolled in public health insurance options, such as Medicaid.
- Financial risk among the families who retain employment-based private health insurance coverage increases as health care costs increase. RAND researchers found that the out of pocket expenditures (as a percentage of family income) were most evident among middle income families. The literature suggests that the excessive financial risk associated with increases in out of pocket expenditures can often translate into reduced access to care, poor health outcomes, and medical debt or bankruptcy.
These findings of reduced offer and enrollment in employment-based private health insurance and increased financial risk among the families with this insurance reveal the extent to which the erosion of employment-based private health insurance is far-reaching.