Drew
Altman, Kaiser Family Foundation June 6, 2018
It’s a practice
that has not received much attention, but some employers have moved to
"progressive," or wage-related, health benefits in recent years.
That's where their lower wage employees pay a smaller share of insurance
premiums, deductibles or health account contributions than higher-wage
employees do.
Why it
matters: Unlike consumers in the Affordable Care Act marketplaces, lower
wage workers in the far larger group market don’t get any help with premiums or
cost sharing. With premiums and deductibles rising and wage growth
stubbornly flat, progressive benefits are one way for employers to help
their low wage employees with their health care costs.
The back
story: We don’t have great data on how many employers are cushioning
the costs of health care for their lower wage workers, but we have some:
- We asked about this in
our 2014 Kaiser-HRET Employer Health Benefits Survey,
and found that 25% of very large firms (more than 5,000 workers) asked
lower wage employees to pay less for premiums, compared with just 1% for
firms with less than 200 workers. Preliminary data from this year’s survey
suggests these numbers have not changed much.
- In a 2016 survey of large firms, The
National Business Group on Health found that 27% of large firms adjust
premiums contributions for lower wage workers, 13% reduce contributions
required for health accounts, and 2% reduce deductibles.
- It’s understandable why
workers might need help. The average cost of a family premium in the group
market was $18,764 in 2017, with workers paying $5,714
of that. Lower wage workers pay somewhat more — $6,001 — in companies with
large numbers of low wage employees.
More large
non-profits seem interested in progressive benefits than corporations do. I
wrote about Harvard University doing this in the Wall Street Journal in 2015. The
University of Miami has a similar program.
The big
picture: Premiums, deductibles and other out of pocket costs have been
rising at a time when wages have been relatively flat, increasing the pain from
out-of-pocket costs for employees and especially for lower wage workers. That's
why progressive health benefits may get a closer look — but they're not a
panacea.
Economists take
it as an article of faith that any break on benefits comes from wages. As an
employer, I know that it's always a dilemma for employers to decide between
wages and benefits, and employers balance the tradeoff in different ways
depending on a myriad of factors (it’s not a straight economic calculation).
There are other
complexities:
- What wage level is fair?
- Will employees just
above the level feel aggrieved or seek a salary cut to reduce their health
costs?
- How complicated is the
policy to administer?
- How will this play out
in unionized work forces?
What to
watch: Despite the challenges, at a time when the 155 million Americans
who get their insurance at work are getting no relief from health costs, don't
be surprised if more employers give lower wage workers some help by linking
premiums or other out-of-pocket costs to wage levels.
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