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RESEARCH Institute Insights for Open Enrollment

November is a big time for consumers, and not just because of the approaching holiday season. From November 1 to December 15, it's open enrollment season for Americans to buy health insurance in the individual market. As consumers across the country consider their options in choosing the right insurance plan for themselves and their families, it's essential that patients, providers, and policymakers understand how medical spending affects the bottom line for millions of American families.

Last week, the JPMorgan Chase Institute released a new report looking at health insurance premium payments for small business owners. We also recently looked at two ways healthcare places a burden on households: regular out-of-pocket medical costs and extraordinary medical payments.

Across all three of these reports, it's clear that healthcare costs—either out of pocket or as part of a premium payment—represent significant expenses for American families and small businesses.

In September, we released new findings on the out-of-pocket healthcare costs of 2 million American families. What we found is many Americans don't have a cash buffer to withstand the volatility created by out-of-pocket healthcare payments and many delay their healthcare payments until they have more liquid assets. The average out-of-pocket spending in 2016 was $714, so as consumers weigh options during open enrollment, the extent of out-of-pocket expenses in each plan, either as deductibles or copays, should be a consideration.

In addition to regular out-of-pocket costs, approximately one in six American families will make an extraordinary medical payment in the coming year. These payments, which could result from an unexpected injury or illness, can have a long-term impact on a family's financial wellbeing. In fact, based on our sample of nearly 100,000 families between 2013 and 2015, we found revolving credit card debt remains more than 10 percent higher among women, younger and older families even a year after a major medical payment.

Finally, our recent report on small business insurance premiums analyzed de-identified banking data for more than 30,000 small business owners, finding they typically spend about $500 per month on insurance for themselves and/or their families on the individual market. The cost of these premiums continues to grow dramatically, though that growth has slowed. In 2017, premiums for these small business owners grew 7 percent, down from a 10 percent increase in 2014. Perhaps most concerning is our finding that nearly half of business owners who spent 6.5 percent or more of their operating expenses on insurance stopped insurance payments the following year, meaning they may be choosing to go without coverage—a scenario that leaves individuals most vulnerable to expensive and unexpected medical costs.

Regardless of age, gender, or income, the Institute's research underscores an important point: even with insurance, medical payments and out-of-pocket costs can create unexpected, and sometimes long-term, financial burdens. The lesson for Americans shopping for healthcare coverage during open enrollment is twofold: compare plans to understand what kind of out-of-pocket costs you may face, and assess your emergency fund to gauge whether it is sufficient to cover an extraordinary medical expense.

The lessons from this research aren't just for consumers; they are also for policymakers, employers, and providers. For example, more transparent and understandable up-front billing, such as an estimate of the out-of-pocket cost for a dental filling, would allow patients to better plan and prepare for health-related expenses.

Further, employer-sponsored pretax health reimbursement accounts could help families pay for unexpected medical expenses without increasing credit card debt. These and other options should continue to be on the table as discussions are had on improving access and utilization of healthcare.

For those who want to learn more about open enrollment, visit: https://www.healthcare.gov/

Diana Farrell is the founding President and Chief Executive Officer of the JPMorgan Chase Institute. Previously, Diana was the Global Head of the McKinsey Center for Government and the McKinsey Global Institute. She served in the White House as Deputy Director of the National Economic Council and Deputy Assistant to the President on Economic Policy.

The mission of the JPMorgan Chase Institute is to provide decision makers with data, facts and analysis to make smart economic decisions. A better understanding of the dimensions of local consumer commerce, especially with city-level details, will arm policy makers, business leaders and others with better information to make sharper decisions and policies.


Diana Farrell

Founding and Former President & CEO