The Future of Bad Debt: The American Worker with Employer Health Insurance

American workers with access to health insurance from their employers were among the lowest financial risks to healthcare providers. No more, according to trends identified in two recent reports.

Zywave, a software company that serves health insurers, and ADP, a payroll company, have crunched the numbers of their respective client bases and identified a series of trends that pose high risk to the bottom line of healthcare providers.

Thanks, no doubt to the Affordable Care Act which soon will limit an individuals out-of-pocket medical expenses to $6,350 ($12,700 for a family), employers appear to be rushing to match that figure with their employee health insurance programs. Zywave drew it’s conclusions based on a study of its database of 50,000 employers and 70,000 health plans.

Also, more young adults under age 30 have access to health insurance coverage from their employers than ever, an increase of more than 4 percent over the last four years, but a shrinking number of young adults are buying that coverage, apparently willing to pay the tax penalty. According to a new report, the “ADP Annual Health Benefits Report: 2014 Benchmarks and Trends for Large Organizations,” by the ADP Research Institute, some 90 percent of full-time workers have access to employer insurance, of which 68 percent take advantage of the benefit, but among the young the percentage is much lower.

Employers Shifting Costs onto Employees

“The number of plans choosing out-of-pocket maximums over $5,000 went from 20 percent in 2012 to 32 percent in 2013,” according to the “2013 Health Plan Design Benchmark Report” by Zywave. “One theory is that employers may see out-of-pocket maximum limits mandated by the ACA ($6,350 for individuals; $12,700 for families for 2014 the plan year) as targets, which would explain the movement toward out-of-pocket maximums over $5,000 in 2013.”

Over 40 percent of plans provided a 100 percent coinsurance, another facet of the minimum standards of the ACA. “If the out-of-pocket maximum movement was due to plans simply setting it at the ACA maximum amount, then it makes sense to me that employers would set their deductible and out-of-pocket maximum at the ACA-mandated $6,350, then offer 100 percent coinsurance,” says Michelle Jackson, a product director for ZyWave. “We could just be seeing an early adoption of what may become a common plan design for 2014 plans and beyond.”

Young People Choose to be Uninsured?

ADP’s report found a wide divergence between older workers who take advantage of the employer health insurance benefit versus younger workers. While 73 percent of those between 50-59 elect to take employer health insurance, less than 50 percent of workers age 20-29 choose to do so.

ADP’s report does not indicate if the young people are electing to stay on their parent’s insurance (which they would be permitted to do until they are 26), which would lower the need for insurance through their employer.

Future Financial Challenges for Providers

Both trends pose increased financial risk for providers, especially the growing propensity of employers to shift costs onto their employees. Hospitals and physicians practices are already finding that up to 50 percent of their respective patient population covered by insurance are not paying their co-insurance and co-pays.