High out-of-pocket costs contribute to poor access to care and financial hardships for California workers

  • Photo of Kevin Lee
Kevin Leeand Laurel Lucia

This is the sixth post in the Labor Center’s blog series “Rising Health Care Costs in California: A Worker Issue.”

In our last post, we explored the challenges associated with worker premium contributions. In this post, we will look more closely at how high out-of-pocket costs are hurting families, and the resulting financial and health care access consequences.

Job-based coverage does not provide adequate coverage for many

While rates of uninsurance have decreased since 2010, the share of  adults ages 19 to 64 who are underinsured has steadily grown since 2003, according to the Commonwealth Fund. Their most recent report using 2018 data finds that 28 percent of U.S. adults under age 65 with job-based coverage are underinsured, meaning they have insurance, but are subject to high out-of-pocket costs such as deductibles and co-payments. The Commonwealth Fund defines underinsurance as out-of-pocket spending—excluding premiums—equaling more than 10 percent of income or at least 5 percent of income among those who are below 200 percent of the federal poverty level, or having a deductible that constitutes at least 5 percent of income. While underinsurance is more common among adults in the U.S. who are enrolled in individual market insurance (42 percent), underinsurance has been growing most quickly among adults with job-based coverage since 2014.

California-specific data on underinsurance is not available for 2018, but an earlier version of the Commonwealth Fund survey found that California had a lower rate of underinsurance than the U.S. in 2016. This likely reflects the fact that, compared to all Americans, Californians are less likely to have deductibles in job-based coverage. However, given the growth in average deductibles over the last decade as discussed in a previous post, individuals and families in California, like their counterparts in the rest of the country, are seeing growing out-of-pocket costs negatively impact their financial well-being and access to care.

Unexpected medical bills and out-of-pocket costs are the biggest affordability concerns for Californians with job-based coverage

In terms of health care affordability, Californians with job-based coverage are most worried about unexpected medical bills (32 percent) and out-of-pocket costs (23 percent), according to a 2018 survey by Kaiser Family Foundation/ California Health Care Foundation. These health care affordability worries ranked higher than concerns about affording gasoline and other transportation costs (18 percent) and monthly utilities (12 percent). They were second only to rent or mortgage payments (25 percent). Given these competing financial needs, Californians are faced with difficult decisions about how best to prioritize their expenses.

Percentage concerned about affording health care and basic necessities

The high degree of worry about unexpected medical bills reflects how common it is to receive these bills. As of late 2018, approximately three out of ten (31 percent) Californians, regardless of insurance type, received an unexpected medical bill in the prior year, in spite of several policies in California that protect consumers in certain situations. For example:

  • A California law that took effect in 2017 protects many patients from surprise medical bills from an out-of-network provider at an in-network non-emergency facility. Brookings found that after the law was enacted, the share of services provided by affected specialist physicians on an out-of-network basis declined by 17 percent. However, millions of Californians do not have this protection because their insurance is not state-regulated due to the employer taking on the full financial risk for employees’ medical claims (known as self-funding).
  • A 2009 California Supreme Court decision protects many consumers from balance billing for emergency services, meaning consumers are not responsible for paying the difference between the amount a provider charges and the amount an insurer allows for emergency services.  However, 7 million Californians do not benefit from this protection based on their type of health plan.

Additional laws and regulations are needed to ensure that Californians are better protected from unexpected medical bills, as we will discuss in a future blog post.

High out-of-pocket costs leads to financial hardships

According to the 2018 Kaiser Family Foundation/ California Health Care Foundation survey, 17 percent of California adults age 18 to 64 with job-based coverage report difficulties with paying medical bills in the past 12 months.

Difficulty paying medical bills and inability to afford coverage and care can cause a variety of financial consequences:

  • Among California adults ages 19 to 64 with job-based coverage, nearly a quarter (23 percent) report being unable to pay for basic necessities due to medical bills, according to the 2018 California Health Interview Survey.
  • Nationally, among the 40 percent of adults with job-based coverage who report having affordability concerns, a majority made sacrifices in order to pay for medical bills; this included cutting spending on household items, putting off vacation or major purchases, using up all or most of their savings, taking up another job or work additional hours, and borrowing money from family or friends, according to a 2018 Kaiser Family Foundation/LA Times survey.
  • Nationally, some insured people who have difficulty paying medical bills report being late or missing a medical bill or other type of bill, being contacted by a collection agency, and even filing for bankruptcy, according to a 2015 survey by the Kaiser Family Foundation.

Difficulty paying medical bills is driven not only by the high cost of health care, but also by broader financial insecurity among many U.S. households. Nationally, four in 10 adults would not be able to cover an unexpected expense of $400 without selling something or borrowing money, according to the Federal Reserve. Among U.S. adults with job-based coverage with a deductible of at least $1,500 for a single person, 44 percent do not have savings that exceed their deductible amount, according to the 2018 Kaiser Family Foundation/LA Times survey.

Another consequence of high out-of-pocket costs is poorer access to medical care

With the increasing cost of health care, individuals and families are forced to forego medically-necessary services. According to the Kaiser Family Foundation/California Health Care Foundation survey, 38 percent of adults in California with job-based coverage report that they or a family member postponed care or medication due to cost. More specifically, 23 percent skipped dental care or checkups, 17 percent postponed getting health care, 16 percent skipped a recommended medical test or treatment, and 13 percent did not fill a prescription.

Percentage with problems affording care

Workers with low-income and those who have high health insurance deductibles or a chronic condition are more likely to have difficulty affording out-of-pocket costs

The challenges associated with unaffordable out-of-pocket costs are more common among certain groups with job-based coverage in the U.S. Nationally, adults with job-based coverage who have high deductibles, income under $40,000 per year, or someone in their household with a chronic condition are more likely to report difficulty affording care or insurance or paying medical bills, and are more likely to delay or skip care due to cost, according to a 2018 Kaiser Family Foundation/LA Times survey. 

In this post, we discussed the impact of high out-of-pocket costs on Californians’ access to health care and financial well-being.

Up next: In the next post, we will explore how rising health care costs affect workers’ wages.