Labor Day in a Pandemic: The Varnish of “Gold Standard” Employer Coverage is Wearing Thin

CHIRblog is back after taking a week off in observance of Labor Day. We at CHIR are cognizant of the fact that while we enjoyed a day off, millions of workers – including essential workers – were on the job, many of them risking their health and wellbeing in the midst of a global pandemic. Even more so, we recognize while celebrating the achievements of the American Labor Movement the persisting gaps in health insurance coverage of American workers.

The U.S. health insurance system operates on the presumption that job-based coverage is the default for nonelderly adults; other forms of coverage, such as Medicaid or individual market policies, are seen as a last resort for those who do not have employer coverage. Employer plans are often touted as the “gold standard” in health insurance. But a recent survey by the Commonwealth Fund found that 26 percent of people with employer coverage were underinsured, while 18 percent of full-time workers and 26 percent of part-time workers were uninsured for at least part of the last year.

The Access Problem

Many workers don’t have access to job-based health insurance, particularly hourly employees, part-time and temporary workers, and small business employees. According to the Kaiser Family Foundation, in 2019, among firms offering health benefits, less than a third offered them to part-time workers, and just 7 percent offered health benefits to temporary workers. Only 56 percent of small firms offered health benefits. A recent study by CHIR expert Sabrina Corlette and researchers at the Urban Institute found that in 2020, 12 percent of nonelderly workers in the U.S. were uninsured. A number of industries considered essential during the COVID-19 pandemic had higher uninsured rates, including agriculture (29 percent), home health (16 percent), and meatpacking plants (14 percent). Even more workers in essential industries were covered by a family member’s job, rather than their own employer, such as child day care workers (53 percent), grocery store workers (35 percent), and workers at skilled nursing facilities (27 percent). While these industries are considered essential, health insurance for their workers is too often considered inessential.

For Workers With Job-Based Insurance, Coverage Is Often Inadequate

A majority of nonelderly adults have health insurance through an employer, either from their own job or as a spouse or dependent of someone with job-based coverage. But despite the reputation of employer plans as the cream of the insurance crop, many workers who have access to health benefits through their job are enrolled in plans providing inadequate protection against the high cost of health care.

The Problem of Underinsurance

According to the recent Commonwealth Fund survey, 26 percent of adults with employer plans are underinsured, up from 17 percent in 2010. Underinsurance is defined as those who were covered for the entire year, but experienced out-of-pocket costs exclusive of premiums equaling at least 10 percent of their income (or at least 5 percent of income for those with incomes under 200 percent of the Federal Poverty Level), and those with deductibles that equal at least 5 percent of their income.

This is in large part because average deductibles have doubled in the last decade. The proportion of workers enrolled in a plan with a deductible increased from 63 percent in 2009 to 82 percent in 2019, and almost 30 percent of all covered workers (including 45 percent of those working at small businesses) had a deductible of at least $2,000 in the same time period.

Employee Premiums Continue to Rise

In addition to facing higher cost sharing, workers in employer plans are paying higher premiums. Average premiums for a family increased 54 percent between 2009 and 2019. Moreover, worker’s premium contributions rose 71 percent, eclipsing the rate of wage increases (26 percent) and the rate of inflation (20 percent) over the last ten years.

To be sure, workers enrolled in job-based insurance are shielded from the full cost through tax-advantaged employer subsidies, while many who are self-employed must pay their entire premium. But thanks to the rising cost of health care, both covered and uncovered workers are facing affordability challenges.

The COVID-19 Pandemic is Exacerbating Coverage Adequacy Issues for Workers

The ongoing public health and economic crises are exposing the numerous cracks in our health care system. Coverage access and adequacy are fraught with inequities and obstacles that leave too many people – workers included – exposed to large medical bills along with numerous other financial hardships. Though it is said any port will due in a storm, not every insurance plan suffices during a global pandemic. Underinsurance leaves many workers without adequate protection against the high cost of health care, and even people with employer coverage could face high out-of-pocket costs if they need treatment for COVID-19. Alongside cost sharing vulnerabilities and the increasing burden of premium contributions, surprise medical bills continue to present a hazard for millions of workers.

We Can Do Better

COVID-19 has been called the “great equalizer.” Rampant disparities in morbidity and mortality and exacerbated economic inequality illustrate the falsity of this statement, particularly for low-income Americans and Black, indigenous, and people of color. But while widening these gaps, the pandemic has also exposed many people previously seen as adequately insured to the high cost of health care, and what has been dubbed the “gold standard” of health insurance is being knocked off of its pedestal.

There are numerous proposals to improve workers’ access to insurance and coverage affordability, including initiatives by states to control costs, legislation to establish federal protections against surprise medical bills,  proposals to create new coverage options outside of the employer market, and efforts to bolster current programs that provide a health insurance safety net. But one thing’s for sure: the current system is failing workers.

American workers have fought hard for the eight-hour workday, fair wages and safe working conditions to protect their health, safety and wellbeing (protections that are far from universal, but should be guaranteed to everyone). Despite this progress, millions of workers still don’t have adequate health coverage. To celebrate workers this Labor Day, let’s do a better job ensuring another protection that should be guaranteed to everyone: access to affordable and comprehensive health insurance.

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