Early US cases of COVID-19 indicate treatment for the virus will require hospitalization for many affected adults of all ages. Data from China show a median hospital stay of 12 days, and recent projections (PDF) estimate an 8-day stay if critical care is not required and a 16-day stay, including 10 days in the intensive care unit (ICU), for the 30 percent of hospitalized patients expected to require critical care—durations in line with estimates for pneumonia admissions.

Beyond concerns about the supply of ventilators, hospital beds, and ICUs, people with COVID-19 who require treatment could face high out-of-pocket costs. Although this is a particular concern for the uninsured, people with employer-sponsored insurance (ESI) may also face high financial burdens associated with the virus.

Major US insurance companies are waiving copayments for COVID-19 testing, and no-cost testing was included in the Families First Coronavirus Response Act. But Americans with private health insurance will still be required to pay out-of-pocket costs for treatment. Although no definitive estimates are available about the costs of treating COVID-19, typical costs associated with hospital admissions for pneumonia were estimated to be about $10,000 without complications and $20,000 with complications in 2018. An uninsured patient treated for COVID-19 in Boston in February 2020 reported her bills for testing and treatment totaled nearly $35,000.

The extent to which people with ESI will be responsible for these costs will depend on the cost-sharing structure of their specific plan. High out-of-pocket costs associated with the virus will pose additional burdens beyond the disease itself, particularly for people with low or moderate incomes, causing financial hardship and medical debt that will compound the broader health and economic effects of the pandemic.

To better understand the out-of-pocket spending risks facing people with ESI who could need treatment for COVID-19, we assess two relevant characteristics—deductibles and out-of-pocket maximums—of ESI plans at private-sector establishments in each state. A deductible is a fixed dollar amount a person must pay in the plan year toward their own medical costs before their insurance begins to pay. An out-of-pocket maximum is the most a person could have to pay for covered medical services in a plan year, including deductibles, copayments, and coinsurance but not including premiums or out-of-network costs.

The Affordable Care Act (ACA) requires plans to limit out-of-pocket costs (PDF), and the 2018 limits were $7,350 for individual coverage and $14,700 for family coverage. But this requirement does not apply to grandfathered plans or to plans not compliant with ACA market reforms, such as short-term, limited-duration plans, and employer plans often have lower cost-sharing than these limits. Although these are not the only plan features that will affect out-of-pocket costs for COVID-19, people with higher deductibles may delay or try to forgo treatment out of concerns about costs burdens—putting their own health and the health of others at risk. And for people who do receive treatment, those with higher out-of-pocket maximums could be responsible for very high costs, especially for more complex cases that require lengthy or intensive treatment.

These out-of-pocket costs could create significant financial hardships—particularly among employees without paid sick leave who would already be losing wages while missing work to receive treatment.

How high are deductibles for employer-sponsored insurance?

Using 2018 data from the Medical Expenditure Panel Survey-Insurance Component, we find that 87.3 percent of employees enrolled in ESI had a deductible in 2018. Among employees with a deductible, the average dollar amount was $1,846 for single coverage and $3,392 for family coverage. The average deductible amount for single coverage represents 3.8 percent of annual income for a person at 400 percent of the federal poverty level (FPL), 6.1 percent of income at 250 percent FPL, and 15.2 percent of income for those living in poverty.

Across states, the share of enrolled workers with a deductible ranged from 44.4 percent in Hawaii, 64.6 percent in the District of Columbia, and 67.4 percent in California on the low end, to more than 97 percent of employees enrolled in ESI in Indiana, Maine, Nebraska, South Dakota, and Utah.

Deductibles for single coverage ranged from $1,308 in the District of Columbia and $1,451 in Utah to $2,322 in Connecticut, $2,337 in New Hampshire, and $2,447 in Maine.

How high are out-of-pocket maximums for employer-sponsored insurance?

Nationally, almost all employees enrolled in ESI—92.3 percent in single coverage and 93.3 percent in family coverage—had an out-of-pocket maximum in 2018. Among employees enrolled in a plan with an out-of-pocket maximum, the average dollar amount was $4,416 for single coverage and $8,375 for family coverage. Those enrolled in a plan without an out-of-pocket maximum would be required to pay coinsurance and copayments according to their policy with no annual limit on the amount they are required to pay.

The average out-of-pocket maximum amount for single coverage represents 9.1 percent of annual income for a person at 400 percent FPL, 14.6 percent of income at 250 percent FPL, and 36.4 percent of income for those living in poverty.

Taking variation across states into account, at least 84 percent of enrolled workers with single or family coverage had an out-of-pocket maximum regardless of state of residence, and more than 97 percent of employees were enrolled in an ESI plan with an out-of-pocket maximum in some states.

The out-of-pocket maximum for single coverage ranged from $3,270 in Hawaii and $3,272 in the District of Columbia on the low end to more than $5,000 in South Carolina and Nevada.

What do deductibles and out-of-pocket maximums mean for COVID-19 treatment costs for people with employer-sponsored insurance?

If someone seeking treatment for COVID-19 has a deductible and has not yet incurred costs for health care services in 2020, they would be required to pay the entire deductible amount before insurance begins to pay for care. Thus, some COVID-19 patients with individual plans could be required to pay at least $2,000 out of pocket, and some with family plans could be required to pay as much as $4,000 out of pocket for COVID-19 treatment.

Some COVID-19 patients will not pay the full deductible amount for their COVID-19 treatment because they will have already paid for health care services in 2020, which includes some who may have already fully met their deductible amount for 2020, and others may not be enrolled in plans with deductibles.

All COVID-19 patients with ESI who have not yet met their annual out-of-pocket maximum would face other out-of-pocket costs through required coinsurance or copays, depending on their health insurance plan. Although out-of-pocket maximums limit financial risk for insured people, on average, a COVID-19 patient with ESI coverage could have to spend more than $4,000 per year if enrolled in a single coverage plan or more than $8,000 combined for a family coverage plan before annual limit protection begins. Variation in deductibles and out-of-pocket maximums across states shows the treatment costs for COVID-19 patients with ESI will depend on their state of residence.

To the extent that treatment for the virus crosses over two insurance plan years, enrollees could even be responsible for two annual deductibles along with coinsurance or copayments, up to two annual out-of-pocket maximums. Employer based insurance plan years can begin in any month of the year, depending on the firm’s contract.

What policy solutions could address out-of-pocket costs for COVID-19 treatment?

Current proposals to address financial burdens associated with COVID-19 treatment costs include capping individuals’ maximum out-of-pocket spending for COVID-19 treatment and waiving patient’s cost sharing for COVID-19 treatment. Florida and New Mexico have already waived cost sharing for patients whose ESI is not from a self-insured company. Congress would need to take action to change cost sharing for self-insured plans, which cover most employees of large companies.

The Internal Revenue Service has issued guidance (PDF) allowing high-deductible health plans to provide testing and treatment for COVID-19 without a deductible and still maintain their high-deductible health plan status. Similarly, the US Department of Health and Human Services has issued guidance (PDF) allowing catastrophic plans to provide coverage for COVID-19 testing and treatment services before people meet their deductible. Although such guidance allows plans to do so, federal policymakers could consider requiring plans to provide coverage for COVID-19 treatment before people meet their deductible. To implement these policies, a specific COVID-19 code is needed in the US version of the ICD-10 system to identify COVID-19 services to be provided without cost sharing.

Given the job loss and associated loss of ESI expected in the wake of this pandemic, policies that address costs of COVID-19 treatment for all, not only those with ESI, will be critical to supporting people who get sick and need costly treatment.

The federal government could develop a public health crisis insurance program to pay for COVID-19 treatment, which would provide protection to people without health insurance and those with ESI or other coverage types. And beyond policies directly targeting COVID-19, legislation proposed before the outbreak would protect consumers against surprise medical bills, which can impose very high out-of-pocket cost burdens for those who require care.

Finally, people with ESI who maintain their employment and their employer-sponsored insurance coverage through the emerging recession and associated job losses may be protected from the worst effects of the outbreak. For others who lose their jobs and insurance coverage, policies that address the overall well-being of American families—by easing the pandemic’s effect on workers, keeping people housed and fed, and maintaining and strengthening Medicaid and CHIP (the Children’s Health Insurance Program) and other forms of public assistance—will be necessary to mitigate the overall harm of the pandemic.