An Uneven Playing Field: Low-Wage Workers Face Difficult Choices In Today’s High-Out-Of-Pocket Health Care System

High out-of-pocket healthcare system affecting low-wage workers

The following is a guest post from Bruce W. Sherman, MD and Wendy D. Lynch, PhD

 Faced with escalating health insurance costs, employers have been making tough choices in recent years. Given a finite human resources budget, should companies sacrifice wages, benefits-eligible workers, or health benefits? Evidence suggests some of each; employee-paid deductibles have risen 67% in five years, and wages remain essentially flat.

What gets less attention is the trickle-down effect of greater cost-sharing for health care on low-wage workers. They, too, face budgetary choices: housing, groceries, and transportation, or medical visits and medications? For high-paid workers, higher out-of-pocket costs for health care may require irritating tradeoffs. But for low-wage workers, the burden is potentially harmful. The median salary for employed workers is under $30,000, while the average premium and deductible paid by a worker is now over $6,000.

This significant expense burden results in distinct and worrisome patterns of health care (non)utilization among the lowest paid workers. However, these patterns are not widely recognized because health plans do not have access to wage information and thus do not report utilization by salary. This paper presents some preliminary findings from a wage-specific analysis conducted using claims and wage data from the Xerox Right Opt private exchange.1


When Consumer-Directed Health Plans (CDHP) first appeared, the premise was reasonable and promising. By assigning greater financial responsibility to individuals, an army of cost-conscious consumers would be mobilized to demand greater value at a reasonable price. Experts envisioned market pressures lowering costs for everyone. Further, dollars deposited in consumers’ health savings accounts would mitigate some of the burden of out-of-pocket costs, while giving them some ‘skin in the game.’

While consumer-oriented plans have led to advances in many areas (transparency, reference-based pricing, shared decision making, etc.), the original goal of mitigating increased costs with employer-funded Health Savings Accounts (HSAs) has fallen short. As healthcare inflation has outpaced all other employment costs, employers have utilized cost-shifting as a primary means to manage benefit expenses. Widespread healthcare consumerism engagement, anticipated as a market-generated response to greater out-of-pocket cost, has simply not materialized. As a result, the portion of healthcare average premium paid by employees has increased by 83% in 10 years, while the average deductible has increased 255% from $303 in 2006 to $1,077 in 2015.1 Today, a worker with family coverage in a HDHP can expect to pay about $4,000 for premiums1 and the maximum out-of-pocket limit for a family is about $13,000, yet on average, employers deposit only $527 in a HSA2. For low-wage workers, many of whom live from pay-check to pay-check, those dollars simply aren’t available. Unfortunately, HSAs have become yet another vehicle for income tax sheltering for the wealthy, while providing little benefit for the majority of working poor.

Waiting for a serious problem

In our preliminary analysis, the effects of significant cost-sharing are noticeable. Low-wage workers enrolled in health benefits use less care overall than higher-paid cohorts.   Among the lowest paid workers ($25K and under), 35% used no health care services at all during the year. Almost 45% of low-wage workers in a CDHP used no care at all (closer to 25% in the PPO plans). Compare that to the highest paid cohort (above $100K), where 19% and 10% used no care in the CDHP and PPO plans, respectively.

Besides the overall lower healthcare utilization rate, our data show some notable differences in utilization patterns that differ between high-wage and low-wage workers, as shown below:

1. Reaction versus prevention.

One of the most dramatic differences is in the orientation about when and how to use care. We created a ratio of the number of preventive visits compared to the number of ER visits.   In the higher-wage groups, there were four preventive visits (a rate of just over 45/100 people) for each ER visit (a rate of about 12/100). In the lowest-wage group, there were six times as many ER visits (62/100) for a ratio of almost three ER visits for every preventive visit (25/100). High-wage workers are 3.8:1 while low-wage workers are 1:2.5.

Part of the reason for this may be because many of these workers may be unable to leave the workplace to receive medical care during working hours due to risk of wage loss.

2. Rescue versus Manage

When ER visits are categorized as ambulatory-care sensitive visits, it indicates that the condition could have been handled with appropriate primary care. Low-wage workers had four times the rate of ER visits categorized as such compared to high-wage workers. Similarly, low-wage workers had roughly six times the rate of avoidable hospital admissions. These patterns indicate that health issues are not managed in ways that preempt serious events and complications, either because of a lack of awareness or concerns about cost.

Earning status and healthcare use

In support, in a national survey,3 people above and below federal poverty level thresholds were asked how cost influenced their use of health care. In all cases, economic status influenced the person’s likelihood of forgoing care due to cost, as shown below.

Percent responding that they did this due to cost. Percent of those above 200% Federal Poverty level Percent of those below 200% Federal Poverty level
Had a medical problem but did not see a doctor 10% 30%
Did not fill a prescription 10% 28%
Skipped a test, treatment or follow-up 12% 28%
Did not see a specialist after being referred 10% 24%

Furthermore, low-wage workers prefer to seek care from sources that do not involve an appointment or an ongoing relationship. Based on national survey data, more than half of those making $35K or less prefer seeking non-emergency care from the ER (32%), urgent care centers (16%) or retail clinics (5%).4 Conversely, among those making $75K or more, over 70% prefer primary care, with fewer than 10% indicating that they preferred the ER. The result leads to a likely lack of coordination and the absence of a true medical home for low-wage workers with chronic conditions.

Understanding wage-based discrepancies

Public health policy-makers have studied health disparities extensively; however, their focus has mostly been a comparison of public versus private insurance or community-based assessments. Far less attention has been paid to health and health benefits inequalities within the employed workforce. To better understand this phenomenon and the extent to which low wage-earners may be forgoing necessary care, employers should consider the following steps:

  1. Integrate work and health data to make salary-specific comparisons.Simply documenting differences in access, prevention and sources of care can help identify areas of education or support that may be needed by different groups. These comparisons may highlight other patterns, such as high-wage, two-worker families that resort to urgent care because primary care is limited to work hours.
  1. Reevaluate current incentive designs to minimize disparities to access to care, whether they are financial, cultural, or organizational (no time off allowed during work hours to access healthcare).

Promoting individual responsibility for health and appropriate care-seeking is a commendable goal. However, when the financial barriers preclude basic, necessary services—particularly for chronic care—one must wonder if the bar has been set too high. In the face of rising deductibles and without sufficient funds to support necessary utilization, the lowest-paid workers may bear a disproportionate share of the burden on physical and financial health.

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Bruce Sherman, MD is the Medical Director, Population Health Management for the RightOpt private exchange offering for Buck Consultants at Xerox. In this role, he provides strategic client support for development, implementation and ongoing management of integrated, value-based health and performance management strategies for exchange clients. Previously he served as the consulting corporate medical director for Wal-Mart Stores, Inc., Whirlpool Corporation, and The Goodyear Tire & Rubber Company. Dr. Sherman has particular interests in the areas of the business value of workforce health and evaluation of quality and efficiency in health care delivery.

Dr. Lynch is a nationally-recognized researcher, speaker and author on the connection between human and business performance. Experienced in large-scale data analytics, her work has focused on human capital management, health care consumerism and the connection between health and business outcomes.She currently runs her own consulting business.


  1. Kaiser Family Foundation, Health Research & Educational Trust. Employer Health Benefits: 2015 Summary of Findings. 2015. Accessed February 23, 2016.
  2. Fronstin P. Health Savings Account Balances, Contributions, Distributions, and Other Vital Statistics, 2014: Estimates from the EBRI HSA Database. EBRI Issue Brief. July 2015(416):1-26.
  3. Collins SR, Rasmussen PW, Doty MM, Beutel S. Too high a price: out-of-pocket health care costs in the United States. Findings from the Commonwealth Fund Health Care Affordability Tracking Survey. September-October 2014. Issue brief. Nov 2014;29:1-11.
  4. FAIR Health. Understanding Consumer Health Insurance Preferences: Consumer Survey. 2015: Accessed July 27, 2015.

[i] To ensure we were testing the effect of wage, we tested and found no differences in rate of having a high deductible, or level illness. Low-wage workers were slightly younger, meaning that they may have been less healthy for their age, but not less healthy than higher-paid workers.

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