Low-income workers and families struggle with premium contributions

Alex Matthewsand Laurel Lucia

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

As described in the last blog post, premiums for job-based health coverage have risen rapidly over the past decade while wages have barely budged. Both the employer- and the worker-paid portions of the premium affect workers. The employer-paid portion is part of workers’ total compensation that could otherwise be going to wages or other benefits, which we will discuss in a future post. Here, we focus on the portion of the premium most visible to workers: the amount deducted from their paychecks.

On average, job-based coverage for California families cost more than $20,000 in 2018, and workers were responsible for about a quarter of that cost. This translates to a worker contribution of $425 per month on average for family coverage, and $77 per month on average for single coverage, according to the California Employer Health Benefits Survey.

monthly premium contributions

Over the last decade, workers’ share of premium costs has increased slightly for single coverage and remained relatively steady for family coverage. However, given the 49 percent real growth in family premiums since 2008, both workers and employers are paying much more than they were one decade ago.

How common is it for Californians to struggle to afford their job-based coverage premiums?

  • In California, 15 percent of people on employer-sponsored insurance reported being “very worried” about paying their premiums, according to a 2018 Kaiser Family Foundation and California Health Care Foundation survey.
  • From 2016 to 2017, one in ten Californians with job-based coverage (10.1 percent) spent more than 10 percent of their household income on premium contributions, a benchmark that Commonwealth Fund researchers use to measure high premium burden.

Low-income workers with job-based coverage especially struggle with affordability

California workers in firms with a high proportion of low-wage workers require premium contribution amounts for single and family coverage that are similar to the amounts required by other firms. But for low-wage workers, these premium contributions constitute a higher percentage of their income.

According to a report by the Commonwealth Fund, from 2016 to 2017 more than a third of people nationwide with job-based coverage and income below 200 percent of the federal poverty line were spending 10 percent or more of their income on premiums. The percentage with such a high premium burden drops significantly among those with income between 200 and 399 percent of FPL, and even more for those above 400 percent of FPL. The report also indicated racial disparities in the cost burden for job-based coverage: among Latinos with job-based coverage, 15 percent faced a high cost burden to cover their premiums, while only 11 percent of white individuals did.
percent with high-burden premium

Most employers require that all eligible workers make the same premium contribution for a given plan. However, some employers, such as the University of California, tier employees’ premium contributions based on their wage level. For example, UC employees’ 2020 premium contributions for a Kaiser family plan range from $69 monthly for workers earning $58,000 or less (full-time equivalent) to $409 monthly for workers earning $171,001 or more. It is relatively rare for employers to structure premium contributions in this way. According to the California Employer Health Benefits Survey, just 8 percent of private California firms had a progressive premium contribution structure in 2018.

Workers with family coverage are left without a safety net

Premiums for family coverage in particular create a high cost burden. In addition to the fact that most employers determine premium contributions on the basis of the number of covered family members, workers with family coverage contribute a higher percentage of the total premium than do workers with single coverage. In California in 2018, workers paid on average 14 percent of the total premiums to cover just themselves, compared to 27 percent when their coverage also included family members, according to the California Employer Health Benefits Survey.

Another problem that contributes to families paying a high percentage of their income on job-based coverage premiums is the “family glitch.” The ACA provides the option of subsidized private insurance for workers if offered employer-based coverage isn’t affordable. But “affordability” is defined in federal regulations on the basis of the cost of individual coverage, even when a worker has coverage for the entire family. Workers are eligible for these ACA subsidies if there is no single coverage option that costs less than 9.86 percent of their income. If single coverage for the worker meets that affordability standard, neither the worker nor the family members are eligible for subsidies, regardless of how unaffordable the offered job-based family coverage may be.

Using estimates from the UC Berkeley-UCLA California Simulation of Insurance Markets model, we estimate that approximately 590,000 spouses and children of workers with “affordable” single job-based coverage are ineligible for Covered California with subsidies even though the worker’s premium contributions for family coverage exceed 9.86 percent of income. Ninety percent of this group of spouses and children nonetheless have job-based coverage, but may struggle to afford premiums. More than eight out of ten (83 percent) Californians affected by the family glitch are in households with married parents plus children.

In this post, we described the challenges that premium contributions pose for many California workers, particularly low-wage workers. In the next two posts, we will discuss the consequences associated with the two other major components of total health care spending:

  • Families’ spending on out-of-pocket costs at the point of care, which can affect access to care and financial security; and
  • Employer contributions to premiums, which can affect workers’ wages and benefits other than health insurance.

Up next: We’ll discuss how Californian workers are affected by out-of-pocket expenses in the next blog post.