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Who Pays for Healthcare When Medical Bills Go Unpaid?

When medical bills go unpaid, those low payment rates have ripple effects that eventually circle back to employers in the form of higher insurance premiums. Here’s what employers can do about it.

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Two years into the COVID-19 pandemic, much can be said about the state of healthcare in the U.S. Across the country, we’re seeing nurses, doctors, and other medical staff leave jobs they once loved due to extreme fatigue and burnout.

By September 2021, nearly 20% of healthcare employees had resigned since the beginning of the pandemic, with another 30% saying they were ready to throw in the towel. (And keep in mind that this was before the recent Omicron surge.) Understaffed, overcrowded, and under-resourced hospitals mean patients have to wait longer to receive necessary care — while some folks skip it altogether. Both scenarios help drive up the rate of excess deaths.

For those who do receive care, the resulting bill can cause financial distress. All Americans have a legal right to hospital-based emergency care, regardless of their insurance status or ability to pay. But when uninsured individuals head to the hospital for care, they double their chances of filing for bankruptcy within four years.

The high cost of healthcare isn’t a problem exclusive to the uninsured, though. A recent KFF poll found that 46% of insured American adults struggle to cover their out-of-pocket medical costs, with another quarter of respondents reporting problems affording their deductibles. It shouldn’t come as a surprise, then, that the average insured hospital patient pays only about 15% of their resulting bill.

If fully covered patients aren’t handling the other 85% of those bills, then who pays for healthcare? As it turns out, the low payment rate among insured adults — 50% of whom participate in group health insurance — eventually circles back to employers in the form of higher insurance premiums.

A Brief History of Insurance Premium Increases

If you pay attention to the benefits space, none of this should come as a surprise. After all, increases in insurance premiums aren’t a new phenomenon. Between 2001 and 2021, insurance premiums for family coverage increased 215%. That’s a dizzying statistic that warrants further discussion; for brevity’s sake, let’s focus on the past five years.

In 2017, annual insurance premiums surpassed $18,700, representing a 3% increase from 2015 for employer-based family coverage — with employees spending about $5,700 for coverage. The average yearly insurance premium for employer-based family coverage rose 5% to $19,616 for single coverage in 2018, while premiums climbed 3% to nearly $6,900. On average, insured employees covered 18% of the cost for individual coverage and 29% for family coverage.

In 2019, insurance premiums rose another 4%. Yet in 2020, something interesting happened: They grew only 2.1%, the smallest increase in decades. Why? In the first year of the COVID-19 pandemic, more people delayed nonemergency care and adopted telemedicine. That year, the average employer cost of healthcare (including insurance premiums) was about $12,500, with employee contributions hovering around $3,300.

Unfortunately, a 2021 Willis Towers Watson survey of U.S. employers suggests this slowdown won’t last. Per the survey results, we can expect a 5.2% increase in insurance premiums this year. Another survey from Mercer closely mirrored those predictions, projecting a 4.7% increase in 2022.

How Employers Can Combat the High Cost of Healthcare

Faced with this reality, employers are searching for initiatives to manage costs while ensuring employees can access affordable, high-quality medical care. In 2022, for instance, another 8% of employers are planning to join the 22% who already structure their employees’ insurance premium contributions based on pay levels or job grades.

Another way you can manage employer health insurance costs is to add Paytient to your existing group health plan. We’ve worked with a number of trusted brands to keep the employer cost of healthcare low while removing financial barriers to medical care for employees. Employees swipe their Paytient card at the time of care, and we cover the cost — thereby increasing payment rates and tempering the high cost of healthcare. Learn more about how Paytient works.

Sir Issac Newton had it right when he told us that every action has an equal and opposite reaction. And while Newton certainly wasn’t talking about insurance premiums when crafting his third law of motion, this concept still applies. When medical bills go unpaid, insurance premiums increase. When insurance premiums increase, coverage gets out of reach for many workers. And when people aren’t insured, they’re more likely to have financial struggles after seeking essential medical care.

The Business of Healthcare
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