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July 9, 2021

The Growing Problem of Out-of-Pocket Costs and Affordability in Employer-Sponsored Insurance

Author Affiliations
  • 1Department of Health Policy and Management, Harvard T.H. Chan School of Public Health, Boston, Massachusetts
JAMA. 2021;326(4):305-306. doi:10.1001/jama.2021.11166

While policy makers and health leaders have appropriately focused on addressing the COVID-19 pandemic, underlying racial and ethnic disparities in health exposed by the pandemic, and expanded coverage for the uninsured, another deep and challenging problem has intensified with little public debate: the growing affordability problem faced by US residents with employer-sponsored insurance (ESI). Most working-age individuals, approximately 155 million people, obtain health insurance through an employer-sponsored plan.1 Out-of-pocket costs and financial risk (ie, the variability in out-of-pocket costs) for this group have increased substantially over the last decade despite reforms such as co-pay waivers for preventive care and the elimination of annual and lifetime benefit limits. This Viewpoint describes the problem, its causes, and possible solutions. Proposed policy remedies follow from the observation that the increasing financial burden of out-of-pocket costs among people with ESI is largely a product of changes in benefit design combined with increases in health care prices paid by private insurers.

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    6 Comments for this article
    Broken System
    David Egilman, MD, MPH | Brown University
    Employer sponsored insurance is a failure. It's long past time to admit this. Our companies cannot compete with those in countries that fund health care with progressive taxation. Unions (the few that are left) have sacrificed wages for a system that generates profits for insurance companies, large hospitals and doctors who perform procedures.

    It is time to recognize the obvious; this Viewpoint helps. It provides no solutions, just vague ideas. Single payer or state and/or federal funding of health time has come.
    Perhaps There Is Finally Process Toward Universal Health Care
    Michael Young | Retired
    Stand back from the problem and the first thing that is realized is that insurance companies do not belong in healthcare as there is no rationale for profit - there is little risk and no product differentiation, therefore no competition; prices can only rise. It's not the fault of drugs either, which account for only 6% of total medical costs (you could give the drugs away without making much of a dent in the overall costs). Do you know that the vast majority of prescriptions written now require a pre-reauthorization? Why? To provide better care? No, rather to maximize the profit of insurance companies and their bottom line. With the problem expanding as the author indicates, one can only hope that Medicare for all (something all civilized countries in the world have, except the U.S.) is finally just around the corner. The visualization of economic disparities is a benefit of covid, and now those expensive, profit-consuming private health insurance company policies have also become visible as economic disparities in a class of people who have likely never experienced economic discrimination. Let's take those healthcare insurance industry profits and put them back into medicine where they belong.
    Time For Change
    Daniel Krell, MD | Retired PCP
    It is long past time to end our dysfunctional health care system. The COVID-19 pandemic starkly and painfully demonstrated the failure of employer-sponsored insurance (ESI) in many specific areas and in totality (1). Suggestions of remedies to fix the current system amount to nothing more than a growing, malignant, Rube-Goldberg machine designed and continually modified by people and entities for their own financial benefit. Yes, standing back from the problem is crucial to understanding the degree of change that is required.

    I was conceived while my father was home on leave from Arctic convoys to
    Murmansk and Archangel (look them up, if you’re drawing a blank); I was a “GI baby” and the government was going to pay for our medical care. At my mother’s first prenatal visit, the OB surreptitiously gave her something intended to cause a miscarriage and was disappointed when I was still around at the second visit. He told my mother that he did it because, “I don’t like socialized medicine.” How long, deep, and destructive is our country’s pathological demonization of a rational, universal health care system!


    1. Access to Care, Cost of Care, and Satisfaction With Care Among Adults With Private and Public Health Insurance in the US, Charlie M. Wray, DO, MS1,2; Meena Khare, MS3; Salomeh Keyhani, MD, MPH1,4, JAMA Netw Open. 2021;4(6):e2110275. doi:10.1001/jamanetworkopen.2021.10275

    Narrow Minded
    Jeoffry Gordon, MD, MPH | California Physicians Alliance
    This Viewpoint correctly describes the pathology but totally misses the pathophysiology of our current system (1). Out of pocket (OOP) expenses were created to enhance "consumer" (patient) participation and restraint in medical care costs (even though the vast majority of expenditures are generated by a physician) in USA's medical psueedo-marketplace. From the start it was observed that this led to restraining both needed and discretionary care. Now OOP are so large they function not only to curtail care but to magnify insurance company's earnings. A rational medical system would have insurance companies paying patients to take all their medications! The Nobel Prize winning Princeton economist Angus Deaton and his wife have observed that rising OOP expenses have totally curtailed productivity-generated wage increases for most workers while health and insurance expenditures function to transfer wealth to the upper 10 percent. This is what they call "A Sheriff of Nottingham" system, i.e. stealing from the poor to enhance the rich. The problem of OOP affordability is a symptom of a medical establishment built around profit not care. The solution is not an ACA-like subsidy of OOP costs (now transferring taxpayer money to the wealthy and further enriching the insurance corporations) but Medicare for all, structuring medical services as a basic utility.
    Reduce Costs by Reducing Costs
    Robert Burney, MD | Retired
    OOP costs were created because policy makers were concerned about the total costs for healthcare paid by the US as a whole. The mistaken belief was that raising the cost to patients would cause them to want less healthcare and thus "bend the curve." Wrong, but they didn't give up. Patients don't generate the demand for healthcare. Providers do. No one gets healthcare for fun.The best way to reduce amount paid for healthcare is to reduce the costs for individual healthcare services. And the best way to do that is to introduce price competition for services. Put out an RFP for the 10 most common services. If a given provider (individual or hospital system) is not in the bottom 10% of bidders, they are not allowed to perform that service for the next 10 years. Then expand to the 20 most common services.
    Disappointing Conclusion
    Shamie Das, MD, MBA, MPH, FACEP | Emory University
    I was optimistic as I read the title to the JAMA Viewpoint by Dr. Rosenthal. She accurately describes the effect of increasing out-of-pocket costs on patients covered under employer-sponsored insurance (ESI) and the majority of those covered under private insurance. The author's conclusions miss the mark and are somewhat myopic given the highly complex nature of healthcare in the United States.

    Consolidation of practices, vertical integration and influence of private equity certainly contribute to forces that increase the prices charged to patients and their third-party payors. We cannot ignore the roles of pharma (direct to consumer advertising, me-too
    medications, patent extension schemes, PBMs, etc.), the medical device industry, the increasing role of technology ($$$), and the pervasive defensive practice of medicine. All are a consequence of the dyscoordinated process by which our 'healthcare" system has come to exist.

    Practices are more expensive to run compared to the past when there was far less technology and administrative overhead. How else is the practice expected to pay for an electronic medical record system that runs in the 5-6 digits? Physician salaries by some estimates barely outpace inflation (1), so one could argue that compensation compared to hours worked has actually decreased.

    Finally, I was most disappointed by the absence of data describing profitability of insurance companies. Insurance companies are simply shifting costs onto patients in order to increase their margins (2). Elisabeth Rosenthal (unaware of any relation to this author), highlights the challenges of medical loss-ratios and how these have contributed to higher costs of care for all involved (3).

    Ultimately, US healthcare is always going to cost more, because sometimes you get what you pay for. That being said, there are plenty of opportunities to increase value-based care that actually helps you have a healthier, happier and sometimes longer life. While Dr. Rosental's viewpoint does shed some light on the problem, the sources of increased cost seem to be over simplified and incomplete.


    1. Hughes, JF "Is It Better to Be a Doctor Now Than It Was 50 Years Ago?" https://www.mdlinx.com/physiciansense/is-it-better-to-be-a-doctor-now-than-it-was-50-years-ago/

    2. McDermott, et al. "Health Insurer Financial Performance Through September 2020." KFF.org https://www.kff.org/private-insurance/issue-brief/health-insurer-financial-performance-through-september-2020/

    3. Rosenthal,E "An American Sickness: How Healthcare Became Big Business and How You Can Take It Back" (2018) Penguin Press