Even with health insurance, out-of-pocket costs challenge family budgets

Ben Horowitz
Oct 29, 2015

An asthma attack, a broken leg or diabetes can easily put a family’s financial health at risk, even when that family is insured and earning enough to put them well above the federal poverty line. That’s why the Governor’s Health Care Financing Task Force should focus its work on providing more affordable health care for hard-working Minnesotans.

In a recent blog, I presented data showing that even when families receive assistance in paying for their health care premiums, they have little resources to spare after paying for food, rent and other basic necessities. And premiums are only part of the picture. Families also face out-of-pocket health care costs sooner or later.

In insurance lingo, “out-of-pocket costs” refer to the non-premium expenses associated with getting health care, like when you pay to fill a prescription at the pharmacy or your co-pay at a doctor’s visit. Wonky discussions of health care often focus solely on either premiums or out-of-pocket costs, but that’s an incomplete view of how much families actually spend.

The Affordable Care Act limits how much health plans can require a family to pay in out-of-pocket costs in a given year. Unfortunately, that maximum is more than two months’ worth of a moderate-income family’s earnings — and that’s before paying for monthly premiums.

Consider the following example: a single individual earning about $30,000 a year has a $6,600 maximum limit on their out-of-pocket costs. They might hit that cap after being diagnosed and treated for cancer, but this wouldn’t be an accurate representation of their total health care expenditures. Factoring in the premiums for a typical health insurance plan bought on MNsure, their actual health costs could be closer to $9,000 over the course of the year. That’s almost a third of their income.

A person can face high costs even without a new health care need. For example, in the plans I reviewed on MNsure from the first two “tiers” of health insurance, the total annual cost of managing diabetes for a moderate-income family can range from $5,600 to $8,400, including out-of-pocket costs and premiums. A diabetic Minnesotan with a $16-per-hour job would face spending a sixth to a quarter of their income to manage their chronic condition.

These expenses exemplify why the Health Care Financing Task Force must focus its efforts on bringing down health care costs for Minnesotans. Broken bones and diabetes should not force anyone to make trade-offs between filling a prescription and filling the fridge.

-Ben Horowitz