[rad-green] Health care costs under job-based plans have grown rapidly, while wages remained flat

*http://laborcenter.berkeley.edu/health-care-costs-under-job-based-plans-have-grown-rapidly-while-wages-remained-flat/
<http://laborcenter.berkeley.edu/health-care-costs-under-job-based-plans-have-grown-rapidly-while-wages-remained-flat/>*

*UC Berkeley Labor Center          December 3, 2019*
*Health care costs under job-based plans have grown rapidly, while wages
remained flat*
*By Alex Matthews, Laurel Lucia and Dave Graham-Squire*

*This is the fourth post in the Labor Center’s blog series “Rising Health
Care Costs in California: A Worker Issue
<http://laborcenter.berkeley.edu/rising-health-care-costs-in-california-a-worker-issue/>.”*

Over the last ten years, the cost of job-based health coverage–premiums and
annual deductibles–has climbed steeply in California, while wages for the
typical worker haven’t grown at all after accounting for inflation
<http://www.dof.ca.gov/Forecasting/Economics/Indicators/Inflation/>.

*Premiums have grown substantially while typical wages have not budged*

Since 2008, premiums for job-based family health coverage in California
have grown
<https://www.chcf.org/wp-content/uploads/2019/08/EmployerHealthBenefits2018QRG.pdf>
by
49 percent on average, based on data from the California Health Care
Foundation’s 2019 California Employee Health Benefits Survey of private
firms. At the same time, real median wages have stagnated.*


[image: premium and wage growth]

*Average family premiums now exceed $20,000 per year *

The rapid growth in premiums for job-based coverage has yielded premium
costs that are high relative to wages. This in turn means that health
benefits comprise a significant share of total compensation for workers
with job-based coverage. In California, single coverage premiums averaged
$8,712
<https://www.chcf.org/wp-content/uploads/2019/08/EmployerHealthBenefits2018QRG.pdf>
per
year in 2018, equivalent to $4 per hour for someone working 40 hours per
week. For family coverage, the average premium was $20,843
<https://www.chcf.org/wp-content/uploads/2019/08/EmployerHealthBenefits2018QRG.pdf>,
equivalent to $10 per hour worked for a full-time worker—just two dollars
less per hour than California’s current $12 minimum wage for employers with
more than 25 workers. For those working fewer than 40 hours per week, the
hourly cost of health benefits is even greater. (In a future blog post,
we’ll further discuss the research on the relationship between rising
health care costs and wages.)

[image: Average premiums for job-based coverage]Total premium cost is
generally shared between employers and employees, with workers paying an
average of 14 percent
<https://www.chcf.org/wp-content/uploads/2019/08/EmployerHealthBenefits2018QRG.pdf>
of
single premiums and 27 percent
<https://www.chcf.org/wp-content/uploads/2019/08/EmployerHealthBenefits2018QRG.pdf>
of
family premiums. As we’ll discuss in a future blog post, the employer
contribution to premiums is part of workers’ total compensation that could
otherwise be going to wages or other benefits. In other words, even though
workers don’t see the whole premium, it still affects them.

*Workers who have deductibles are increasingly vulnerable to out-of-pocket
costs*

While high premiums present potential affordability challenges for all
workers with job-based coverage, 46 percent
<https://www.chcf.org/wp-content/uploads/2019/08/EmployerHealthBenefits2018QRG.pdf>
of
covered California workers in single and family plans face the additional
challenge of having an annual deductible, according to the 2019 California
Employer Health Benefits Survey. Many workers with no deductible have also
faced increased out-of-pocket costs over time, such as higher co-payments,
but in this post, we focus on deductibles because deductibles are easy to
compare across plans and can especially hinder affordability. Individuals
with deductibles are more likely to face difficulty affording care or
problems with medical bills than those without deductibles, as we will
describe in a future post.

The percentage of covered workers with a deductible is significantly lower
in California than nationally (82 percent
<http://files.kff.org/attachment/Report-Employer-Health-Benefits-Annual-Survey-2019>
of
those with single coverage in the U.S. have a deductible), likely due in
large part to Californians’ high level of enrollment in HMOs, a plan type
that is less likely to include a deductible than high-deductible plans or
PPOs.

In health plans with a deductible, workers are responsible for paying the
full cost for some or all types of care until their spending during the
year reaches their deductible, at which point the insurer begins to pay a
share of costs and the worker pays copayments or other forms of cost
sharing. Among California workers with a deductible, the average deductible
amount was $1,402 for those with single plans and $2,706 for those with
family plans in 2018. Average deductibles in California have increased
<https://www.chcf.org/publication/2019-edition-california-employer-health-benefits/>
84
percent for single enrollees and 77 percent for those with family coverage
since 2008, after accounting for inflation. The proportion of workers with
deductibles has also grown since 2008.

[image: deductibles and amounts]

Most of the growth in the number of people with deductibles is due to more
workers enrolling in high-deductible health plans (HDHPs). In 2008, just 4
percent of California workers were enrolled in HDHPs; by 2018, that
proportion had nearly quadrupled to 15 percent.

Workers at certain firms were more likely to have deductibles than others
in 2018:

   - *Non-union firms:* Only 19 percent of workers at unionized firms were
   enrolled in plans with annual deductibles compared to 62 percent of workers
   at non-unionized firms.
   - *Small firms:* Two-thirds (66 percent) of workers at firms with fewer
   than 199 workers had a deductible, compared with just 35 percent at firms
   with more than 200 employees.

As health care costs have risen for Californians with job-based coverage,
those with deductibles feel the pain even more acutely: in addition to
increasing premiums, they also are subject to greater risk of out-of-pocket
spending when they access care.

*Up next:* In the next blog post, we’ll explore the affordability
challenges for Californians who are paying a high share of income on their
premium contributions to job-based health coverage.



* We focus on median wages rather than average wages because wage growth
over the last ten years has been concentrated among the top ten percent of
earners, nationally
<https://www.epi.org/publication/state-of-american-wages-2018/> and in
California
<http://laborcenter.berkeley.edu/low-wage-work-in-california/#the-numbers>.
For this reason, median wage more accurately reflects how workers’ wages
have changed over the years.

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