Measuring the Financial Exposure from Medical Care Spending Among Households with Employer Sponsored Insurance

We develop an empirical method to assess the degree of financial exposure associated with medical care spending among non-elderly U.S. households with employer-sponsored insurance. A key feature of this method is its simplicity – it only requires data on out-of-pocket (OOP) health care spending and total health care spending and does not require detailed knowledge of health insurance benefit design. We apply our method to assess whether households with a chronically ill member face more financial exposure given their level of total spending relative to households with no chronically ill members. We find that the insured chronically ill face more financial exposure than the insured non-chronically ill. Additional analyses suggest that the reason for this additional financial exposure is not that households with a chronically ill member are in different, less generous plans, on average. Rather, households with a chronically ill member have higher spending on certain types of medical services (e.g., pharmaceuticals) that face higher levels of coinsurance. Given recent work on value-based insurance design and coinsurance as an obstacle to medication adherence, our findings suggest that the current design of health plans could jeopardize both the health and the financial well-being of the chronically ill.