Potential Exposure of Enrollees in Private-Sector Employer-Sponsored Insurance to Out-of-Pocket Costs, 2005 to 2015

Over the past decade, private-sector employers have taken a number of steps to limit the growth of health care costs, including requiring larger employee premium contributions and greater cost sharing from enrollees and increasingly turning to high deductible health plans (HDHPs) with, or without, savings options (HSAs and HRAs). Although these measures may have contributed to decreased growth in total premiums relative to growth in the previous decade, the increases in deductibles and employee premium contributions have far outpaced increases in enrollees’ incomes. Little is known about how these trends have affected ESI enrollees’ potential exposure to out-of-pocket (OOP) costs and how that cost compares to workers’ incomes. Evaluating the potential exposure to financial risk in the plans offered to workers requires data on workers’ incomes, employee premium contributions and deductibles for the full range of plans offered by their employers. Unfortunately, no national survey collects linked data on employers and employees.

Our solution to this data problem is to construct a synthetic linked data set and simulation model. We use pooled data on workers from the 2003-2005 and 2013-2015 Medical Expenditure Panel Survey-Household Component (MEPS-HC) to form synthetic workforces for establishments in the 2005 and 2015 MEPS Insurance Component (MEPS-IC). In particular, for each establishment we select workers who match establishment characteristics (e.g., region, industry, size, offers of insurance) as closely as possible. We then fine-tune each synthetic workforce by adjusting sampling weights to align workers’ characteristics (e.g., the percent that are women, over age 50, low/medium/high wage, and have single/non-single coverage) to match the percent distributions reported by establishments. The resulting model provides a unique data resource that preserves correlations between establishments’ and workers’ characteristics, to the greatest extent possible.

We use these linked data to examine the choice set of plans offered to employees and the range of exposure to financial risk across these choices. We examine the percentage of individuals and families that would be exposed to potential OOP costs exceeding 10%, 20% and 30% of workers’ family incomes under different scenarios. Our first scenario is the simplest and uses two measures of potential out-of-pocket medical care costs, annual deductibles and OOP maximums, in combination with employee premium contributions. Our second set of scenarios adds a probabilistic dimension to the analysis by exposing enrollees to catastrophic scenarios (with and without a hospital stay) that represent the 90th percentile of use and expenditures for individuals and families in the MEPS-HC. These analyses utilize additional details on plan cost-sharing available in the MEPS-IC. In characterizing the employees’ choice set we explore the trade-offs employees face between choosing lower employee premium contributions vs. lower exposure to financial risk from possible medical care use. Given the trends noted above, the primary goal of our analysis is to examine how ESI enrollees’ exposure to financial risk has changed in the decade from 2005 to 2015. We examine overall trends and also compare trends for subgroups of enrollees such as those in small and large firms and in low-wage and higher-wage establishments.