Can Older Adults with Employer Coverage Afford Their Health Care?

Introduction

While people age 50 and older make up a little more than one-third of the U.S. population, they account for more than half of national spending on health care, owing to their higher-than-average health needs.¹ Both Medicare and the Affordable Care Act (ACA) have helped protect Americans against the rising risk of catastrophic health care costs as they age — Medicare by providing comprehensive health coverage starting at age 65, and the ACA by preventing insurers from rating people based on health and offering subsidized coverage through Medicaid and the insurance marketplaces for the millions of adults who don’t have access to employer coverage. Together, they have given many older people and their families more certainty that age and retirement won’t rob them of comprehensive health insurance.

Yet little attention has been given to the extent to which employer coverage, which insures more than half of older adults ages 50 to 64, is affordable for this age group and provides timely access to health care. Premiums and deductibles in employer plans have outpaced income growth over the past decade.² The question is whether employer coverage is providing adequate protection against health care costs for an age group at higher risk of health care expenditures.

In this brief, we use data from the Commonwealth Fund’s 2022 Biennial Health Insurance Survey to examine whether 50-to-64-year-olds with employer coverage find their health plans and their health care affordable. We focus particularly on the experience of older adults with low and moderate income:

• Low income is defined as less than 200 percent of the federal poverty level, or $27,180 for an individual and $55,500 for a family of four in 2022.
• Moderate income is 200 percent to just under 400 percent of poverty, or $54,360 for an individual and $111,000 for a family of four.

The survey research firm SSRS interviewed a nationally representative sample of 8,022 adults age 19 and older between March 28 and July 4, 2022. This analysis focuses on 1,978 respondents ages 50 to 64 years (see “How We Conducted This Survey” to learn more).

Key Findings

Fifty-five percent of older adults ages 50 to 64 reported having employer-sponsored insurance (Table 1). Employer coverage rates rise with income: low-income older adults reported similar rates of coverage through employers and Medicaid, while moderate- and higher-income older adults were predominantly covered by employers. More than 80 percent of adults ages 50 to 64 with incomes at or above 400 percent of poverty had employer coverage compared to about a quarter of those with incomes under 200 percent of poverty.

Many older adults with employer coverage struggled to afford their premiums. More than one-quarter said it was somewhat or very difficult to afford their premiums. People with low incomes reported difficulty in paying premiums at more than two times the rate as those with incomes at or above 400 percent of poverty.

About one-quarter of survey respondents with employer coverage all year had such high out-of-pocket costs and/or deductibles relative to their income that they met our threshold for being underinsured (see box). More than half of low-income older adults were underinsured, which is more than four times the rate of those with incomes at or above 400 percent of poverty.

High cost sharing in health plans can impede access to care for older adults. Nearly one-third of older adults in employer plans reported skipping or delaying care because of cost in the past year. Of those who reported problems, nearly three-quarters said it was for care associated with an ongoing condition (48%) or a combination of new and ongoing conditions (25%) (Table 2).

Cost-related problems getting health care were higher among low-income older adults, more than half of whom reported problems accessing necessary health care because of the cost. Among low-income adults who had a chronic health problem, one-quarter reported not filling prescriptions related to their conditions or skipping doses because of the cost of their medications (Table 2).

Older adults with employer coverage also faced significant cost barriers to dental care. Nearly half of low-income older adults and one-third of those with moderate incomes in employer plans had delayed or not gotten dental care in the past 12 months because of cost (Table 2).

Health care costs are also leaving older adults with medical bills they cannot pay. Thirty percent of older adults in employer plans reported difficulty paying their medical bills or were paying off medical debt over time.

Among older adults with employer coverage, those with low and moderate incomes were at greatest risk. About two of five low- and moderate-income respondents reported debt or problems paying medical bills. Nearly one-third of low-income adults in employer plans had medical debt they were paying off over time.

Older adults with problems paying medical bills or debt are at risk of both near- and long-term financial consequences, across the income spectrum. Forty-six percent of respondents with medical bill problems reported taking on credit card debt to pay off their bills, one-third received a lower credit rating because of their bills, and more than a quarter exhausted their savings to pay their bills (Table 3).

Many older adults with employer coverage lacked confidence that they have enough money to retire, especially those with lower incomes.³

Medical bills and debt were associated with a dramatic drop in confidence across all income groups. Of those struggling with medical bills or debt, 63 percent said they lacked confidence that their savings and income would allow them to retire comfortably. This was more than double the rate of those without medical bill or debt concerns.

Policy Implications

One of the most important functions of health insurance is to protect people against catastrophic health care costs. Older adults also depend on good health insurance to enable access to care without the fear of incurring medical debt. The survey data in this brief indicate employer health insurance is failing many older adults, especially those with low and moderate incomes.

Federal and state policymakers have several options to improve the cost protection of employer plans and expand coverage options for older adults under age 65.

• Create a federal fallback option to close the Medicaid coverage gaps. Low-income older adults with employer coverage are the most at risk of being underinsured or reporting difficulty paying premiums. The ACA allowed states to expand Medicaid eligibility to adults with incomes under 138 percent of poverty even if they have an offer of insurance from their employer, but 10 states have so far not done so. Congress could step in to fill the coverage gap in these states to provide a more affordable option for low-income older adults.
• Lower the ACA’s employer coverage “firewall.” This provision makes people ineligible for marketplace subsidies if they have an offer of employer coverage with a premium that costs less than 9.1 percent of their income and an actuarial value of more than 60 percent — meaning their health plan pays 60 percent on average of enrollee health care costs. If Congress lowered the premium threshold or raised the actuarial value threshold, more people struggling with premiums and medical costs could access subsidized marketplace plans.
• Create new public insurance options. Older adults with employer plans can face high premiums, deductibles, and other cost sharing largely because of the high prices commercial insurers and employers pay providers for services.⁴ Since employers and insurers have not uniformly used their purchasing power to lower prices, federal and state policy makers could intervene by creating new public insurance options.⁵
• Use rate regulation to limit growth in premiums and cost sharing. States regulate insurance sold to employers, so they could use rate regulation to limit growth in premiums and cost sharing, something Rhode Island has already done.⁶
• Pass legislation to improve employer coverage. States and the federal government could explore other policy options to improve employer coverage directly. An example is the ACA requirement that all insurers and employers cover young adults on their parents’ insurance plans. Prior to the ACA, 37 states had passed legislation with comparable requirements.⁷ Similar policies could include requiring income-adjusted premiums and cost sharing in employer plans.