Coverage Without Lowering Out-of-Pocket Cost Is Not Enough–It’s Time to Address Affordability

Jan 5, 2024

President Biden and lawmakers in Congress have made tremendous strides in increasing access to healthcare–both by expanding coverage and by lowering the cost of services like prescription drugs in Medicare. These are fantastic steps that stand in contrast to Republican efforts to repeal or water down coverage, cut Medicare and Medicaid, and loosen up regulations so that insurance corporations can offer more high-cost “junk” plans. 

But it’s not enough. Millions of people who have coverage, whether through their employers or through the Affordable Care Act, can’t afford to use it because of too high out-of-pocket costs that deter people from getting care, drive households into debt, or force families to choose between their healthcare and other routine expenses like housing and groceries. 

Insurance coverage is critical for improving health, but it can only work if people can afford the premiums and the out-of-pocket costs. And both are rising.

The Affordable Care Act (ACA) that HCAN and many other allied groups helped pass in 2010 has survived dozens of political, legislative and legal attacks to now reach record enrollment and majority support from the public. Bigger tax credits over the last two years have reduced premiums for middle-class families saving them an average of $800 annually.  The law also continues to provide critical consumer protections for people with all kinds of insurance by stopping discrimination against pre-existing conditions, ending gender discrimination, eliminating caps and limits on coverage, and many others. The ACA has both expanded coverage and improved the quality of coverage for hundreds of millions Americans. 

But affordable premiums for insurance coverage are just the first step in accessing healthcare. Actually using the coverage when you are sick to pay for services that are beyond preventive care often proves more challenging. Deductibles, co-pays, and other out-of-pocket “cost-sharing” expenses may render coverage moot when patients can’t afford their share of the cost or when they have to shell out thousands before their insurance plan starts to pay for treatment. 

For example, deductibles, the amount a patient must pay toward the cost of in-network covered services before the insurance plan will start paying, have risen substantially from 2014 to 2024 in ACA plans with combined medical and prescription drug deductibles. 

The problem isn’t exclusive to the ACA: millions with employer sponsored plans are also facing increased deductibles as well as skyrocketing premiums. The number of employer plans that require patients to pay a deductible is rising as the number of employers offering high deductive plans grows.

High Deductible Health Plans (HDHPs) typically have reduced premiums but leave people at greater risk of being underinsured and at increased risk for medical debt.  In fact, these plans are intended to reduce overall usage of health care by increasing the burden on patients.

While people with ACA premiums are getting more affordable coverage because of President Biden’s commitment to increased premium assistance, the overall cost of healthcare continues to rise and the more generous premium assistance isn’t permanent.  The average cost of workplace health insurance premiums for family coverage reached nearly $24,000  in 2023, jumping 7.0% from 2022, according to KFF’s latest survey of employer-sponsored coverage. These increases are outpacing wage growth: while premiums for family coverage rose 7.0% in 2023, wages grew about 5.2% and inflation rose 5.8%.  Costs for employer coverage are expected to increase 6.5% for 2024. Affordable Care Act coverage will increase by around 6.0% in 2024. These increases are the largest in a decade.

Health insurance companies made record profits during the pandemic because many fewer people used their healthcare plans, resulting in fewer claims to pay. But big profits continue as the pandemic has receded. In 2023, the seven big for-profit health insurers alone made more than $40 billion in profits on revenues in just the first six months of the year. Profits were up 8.1% compared to the year before. Given the soaring premiums in 2024, we can expect to see similar profits this year even as medical debt continues to soar and families struggle to afford the basics. 

The anxiety that millions of Americans feel about the state of the economy despite low unemployment and improvements in inflation is no mystery: affordable healthcare is a constant worry in a system where profit trumps affordability or health outcomes. That’s why more action is needed to increase competition among insurers, reduce premium and out-of-pocket costs, and also to reduce drug prices, which is a key driver of overall health care costs.