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For low-income people, employer health coverage is worse than ACA

Illustration of heart monitor charting health care costs
Illustration: Sarah Grillo/Axios

There has been appropriate handwringing since 2010 about the affordability of Affordable Care Act plans in the marketplaces. But new data show that health insurance is decidedly less affordable for lower income people who get coverage at work than for their counterparts with similar incomes in the marketplaces.

Why it matters: It’s another example of how, when we focus so much on the ACA markets, we lose sight of problems in the employer-based health system where far more people get their coverage. For lower-wage workers, their coverage is decidedly worse than ACA coverage is.

The details: A low-income family with a marketplace plan pays 8.4% of their income on premiums and out-of-pocket costs, compared to 14% for a lower-wage family with employer coverage (those with incomes below twice the poverty level).

  • That's based on Current Population Survey data on what people at that income level paid for employer coverage, plus exchange premium data collected from Healthcare.gov and state-based ACA marketplaces.

How it breaks down:

  • For low-income families with marketplace plans, the out-of-pocket costs are 4.7% of their income, while the premiums are just 3.7% of their income.
  • For those with coverage through work, the out-of-pocket costs are 5% of their income, roughly the same as the families with marketplace plans.
  • The big difference is in the premiums — because the low-income families with workplace coverage pay about 9% of their income to cover those payments.

The largest share of group insurance premiums, paid by employers, also depresses wages for lower-wage and other workers.

Between the lines: It’s not really surprising that marketplace enrollees do better. The ACA provides financial protections for lower-income people enrolled in subsidized health plans in the marketplaces or in Medicaid, and there are no similar income-based subsidies that apply to employer plans.

  • In fact, as employers shift more costs to employees, low and moderate-income families face several thousand dollars in premium contributions and cost sharing.  
  • For firms that employ disproportionately low-wage workers, it can simply be too expensive for employers to provide good coverage. Premiums averaged $6,896 for a single policy and $19,616 for a family plan in 2018.  

We tend to think of everyone with employer coverage as one big group, but it’s really lower wage workers — and, while it’s a different subject, also people with major illnesses — who take it on the chin in the current private health insurance system. They are also the group with employer coverage who would benefit the most from a Medicare-for-All style plan.

The bottom line: Employer-based coverage is by far the largest source of health insurance, and it now provides the least financial protection for lower income workers who need it most. We debate affordability in the ACA marketplaces a lot, but we don’t talk about this far larger problem much, if at all.