Out-of-pocket costs balloon

Until now, the fight over health care reform has mostly been a battle over two numbers: how many Americans have insurance, and how much they pay in premiums. It may be time to think more seriously about a third number: out-of-pocket costs.

The Kaiser Family Foundation last week released its annual survey of employer-sponsored health plans. The survey shows that 2015 premiums for family coverage were 4.2 percent higher than in 2014, a rise slightly greater than those of the past few years.

But increasing premiums aren’t the most interesting part of this year’s report. Kaiser also tracks how much employers and health insurers charge beneficiaries to use their coverage, starting with their annual deductibles – the amount people have to pay out-of-pocket, above and beyond their premiums, before their insurance kicks in.

If premiums have jumped, deductibles have been strapped to the side of a rocket. While premiums for single coverage have grown roughly in line with overall health care costs over the past decade, deductibles have increased almost three times as much. For workers with an annual deductible for single coverage in 2006, the average was $584. This year it was $1,318.

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That trend isn’t being driven only by the minority of employees with lousy coverage. In 2006, a $1,000 deductible was rare, except for people at small companies. Today, almost half of insured workers face a deductible of $1,000 or more, and for 36 percent of people at small employers the number is twice that high. Moreover, the burden of high deductibles isn’t evenly distributed: Companies where more than one-third of workers earn $23,000 or less have deductibles that are 29 percent higher, on average, than companies where fewer workers are paid at that low level.

Companies are increasingly blaming Obamacare for higher out-of-pocket costs. The law imposes a so-called Cadillac Tax on high-cost insurance plans, starting in 2018. Deductibles and other cost-sharing don’t count toward the cost, so companies are shifting more of the price of coverage into out-of-pocket payments to avoid the tax.

Obamacare also includes a cap on deductibles and other out-of-pocket payments. But those caps don’t apply to all plans; and at $6,600 a year for single coverage ($13,200 for family plans), the caps are too high to make a difference to most people.

As the share of Americans without health insurance falls below 10 percent, the fight needs to focus just as much on making sure that those who have insurance are able to use it. •

Christopher Flavelle is an editorial writer for Bloomberg View.

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