How do your employees make healthcare ends meet?

It’s not just patients who struggle to figure out the price of healthcare. Employers are struggling, too. Most employers just take it on the chin every year when the annual increase is announced by their broker.

And even a good broker doesn’t typically help you figure out if you are spending rationally. They just let you know how your increase compares to their other clients and what they’re hearing about industry more generally. But helping you figure out how you’re spending compared to your competition? Not so much help.

The median household income in the U.S. is approaching $62K. That’s the household income, mind you; it’s not the median salary.

Now let’s look at healthcare. The average cost of healthcare for a family of four surpassed $28,000 per year in 2018. That number includes employer and employee paid premiums and out-of-pocket costs such as deductibles and copays. $28K! That’s nearly 50% of the average household income. That is an insane ratio! And one way or another, that $28,000 has to be paid.

The average retail employee in the U.S. earns less than $14/hr. A full-time job at $14/hr nets less than $28,000/year after taxes. That means many Americans are earning less than it takes to cover the healthcare for a family of four. And that’s before the rent and something to eat. Obviously, that’s not doable. But let’s assume that the $14/hr retail employee is young and single (not true, but let’s assume it for now). According to the U.S. Department of Health and Human Services, the average cost of annual healthcare for a young, single American is over $3,000 per year. Where does someone earning $28,000/year come up with $3,000 ($250/month)?

But here’s the challenge. If you employ $14/hr employees, how do YOU come up with the money to take care of them? The family person needs to come up with $28,000. As an employer, you certainly can’t do it. That would mean doubling the payroll. But the employee can’t cover it either. So, suppose you split it. You invest half–$14K. That would increase your payroll by 50%. And where would the employee come up with the other $14K. The numbers just don’t work.

So, what happens? In most cases, the employers that pay $14/hr offer nothing more than the bare minimum. That often means spending $3,000 per year or less on employer paid insurance. Where does that leave the employee who can’t come up with the other $25,000? There are two answers:

  1. In the poor house, feeling the weight of debt collectors and lawsuits or
  2. Neglecting the care they and their families need, often leading to further medical (and financial) complications.

There’s not much an employer can do financially. The economics of a business that pays employees $14/hr simply don’t work. But there is something the employer can do to help. Employers can help their underinsured employees become better healthcare consumers. They can educate them on how to become better healthcare consumers. That means finding the best medical care at the lowest cost, avoiding unnecessary and duplicative tests and procedures, and how to care for themselves and their families to minimize the need for expensive healthcare services in the first place.

Unfortunately, those at the lowest end of the economic totem pole are often the same people with the most limited access to help and support. The least we can do is to help them help themselves by empowering them with the knowledge, information, self-confidence and support necessary to make the best of a bad situation.