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Jon R. Gabel, Roland McDevitt, Ryan Lore, Jeremy Pickreign, Heidi Whitmore, and Tina Ding, Trends In Underinsurance And The Affordability Of Employer Coverage, 2004-2007, Health Affairs Web Exclusive, June 2, 2009 [Abstract] [PDF] [Technical Appendix] [Reprints & Permissions]

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Average Out-Of-Pocket Expense For Family?

Larua C. Trueman   ( 4 June 2009 )

Re: Average Out-Of-Pocket Expense For Family?

Randall C. Walker   ( 12 June 2009 )

Average Out-Of-Pocket Expense For Family? 4 June 2009
Larua C. Trueman, Health Policy Analyst Self-Employed Send comment to journal: Re: Average Out-Of-Pocket Expense For Family? lclaytrueman{at}gmail.com Larua C. Trueman	This article documenting the 34% increase in out-of-pocket costs from 2004 to 2007 was interesting. It certainly quantifies people's fears, in that Americans reported that their number-one concern about health care was cost in an Accenture study in 2008. However, while a 34% increase in out-of-pocket costs sounds pretty sobering, the actual average dollar cost you report of about $700 seems like a real deal. In fact, I thought to myself, "Wow, I'd be happy if my family's out-of-pocket expenses were that low!" Then, I realized that this number is per person for an adult. We are a family of five: three teens and two adults. The deductible alone for our UnitedHealth policy is $1,300 per individual, not to exceed $3,900 for everyone all together. So, before anyone in our family begins to get coverage for illness, we have to spend $1,300. Then, of course, there follows a 20% copayment. There is maximum out-of-pocket protection at $2,700 for an individual and $5,700 for the whole family (but this is much higher if we use out-of-network providers). As you can see, this dwarfs $700. In addition to the deductibles and copayments, my "out-of-pocket" share of the premium deducted from my paycheck was about $2,700 in 2008. It should be noted that these numbers come from what would be deemed the "richest" United plan (a PPO) that was offered to its employees. So, as you can see, $700 out of pocket sounds really good -- and really low. I am wondering if you have a sense of what the average family is spending out of pocket for their health care, including their share of the premium?
Re: Average Out-Of-Pocket Expense For Family? 12 June 2009
Randall C. Walker, Salaried Physician in Infectious Diseases Mayo Clinic Send comment to journal: Re: Re: Average Out-Of-Pocket Expense For Family? walker.randall{at}mayo.edu Randall C. Walker	Laura Trueman makes important observations in her comment. Her family is participating in a high-deductible, high-copay (with caps), but relatively low-premium (employer-supplemented) policy. However, the main factor that would determine this insurance's affordability should be the income of the family in question. "...a family of five: three teens and two adults. The deductible alone is $1,300 per individual, not to exceed $3,900 for everyone all together. "...there follows a 20% copayment. "There is maximum out-of-pocket protection at $2,700 for an individual and $5,700 for the whole family (but this is much higher if we use out-of-network providers). "In addition to the deductibles and copayments, my 'out-of-pocket' share of the premium deducted from my paycheck was about $2,700 in 2008." In a "good" year, with no illness, the maximum this family pays is the $2,700 premium. In a "bad" year, where someone, or more, might become extremely ill, the maximum this family pays is $5,700 + $2,700, or $8,400. If the family income is $40,000 a year, such a "bad" year of health expenses is over 20 percent of their family budget -- and would be unsustainable for more than a year, even with pre-tax dollars. But, for the same coverage, and with the same absolute dollar amounts, a family with an income of $120,000 would find that this policy, in a "bad" year, is only 7 percent of their overall income; and in a "good" year, with only the premium being paid, it represents only 2.25% of their income. With the average income for a U.S. family of five being about $84,000 a year, this policy seems reasonable: a maximum of 10% of income in a worst-case-scenario year, and as little as 3.2% of income in a premium-only, everyone-healthy year. In a health savings account (HSA) strategy, the family could put the difference between the good year and the bad year costs into an account that would accrue tax-free, and ultimately be used in retirement for other needs, or even passed on to one's estate. To make the entire process equitable, across all income levels, it would be possible to use a means-adjustment mechanism to pay premiums, below-deductible payments and copays at the time of withdrawal from the HSA. I discussed this in more detail in a letter last month in Health Affairs.