The share of income a family can afford to spend on health care and coverage depends on many things, including total earnings, other household expenses, whether their health costs are one-time or recurring, and a wide range of other personal circumstances. There is no cut-and-dried level of medical spending that is just too much for all families to absorb. Yet an indicator of high health cost burden can be a helpful way to track the extent to which people feel the economic pinch of rising premiums and out-of-pocket costs.
This measure reports the share of Californians who reside in households that spend 10% or more of their income on health care services and insurance premiums. In 2011-12, 17% of Californians were in such households.
Before the Affordable Care Act (ACA) was enacted, the percentage of people facing high cost burden differed significantly by insurance status. In particular, nearly half of all people with individual coverage spent 10% or more of their income on health care costs. This isn't surprising in view of the fact that people in individual plans, without an employer premium contribution, paid the full monthly insurance premium. This ongoing cost led many in the individual market to choose products with high deductibles or other features that resulted in substantial costs when obtaining expensive care became necessary.
In addition to expanding coverage broadly, the ACA aims to ensure people can afford coverage and care. With effective implementation of the ACA, the share of people spending 10% or more of their income on health care costs should fall — particularly among the increasing number of Californians obtaining insurance through the individual market. Tracking this indicator in the months and years to come will show what progress is being made toward that goal.