The Hidden Economics of Health Insurance Affordability

According to Alan Balch, PhD, CEO of the Patient Advocate Foundation and the National Patient Advocate Foundation, rising employer-sponsored insurance premiums—outpacing both inflation and wage growth—are creating severe financial pressure for low- and middle-income families. He describes a “perfect storm” in which healthcare costs are increasing alongside everyday expenses such as housing, food, and utilities, while household incomes fail to keep pace. For many families already managing serious or chronic illnesses, this imbalance forces painful trade-offs that directly affect access to care.

Balch emphasizes that these decisions are not discretionary or short-term choices, such as whether to seek treatment for a minor illness. Instead, patients are weighing essential household expenses against life-sustaining therapies for conditions like cancer, HIV, or diabetes. From a patient’s perspective, all out-of-pocket costs—insurance premiums, coinsurance, deductibles, medications, or basic living expenses—come from the same limited pool of income. As healthcare spending rises, patients face compounding financial strain.

The burden is often amplified by lost wages when illness requires time away from work, further reducing household income while medical expenses simultaneously increase. This dual pressure leaves families with little flexibility and increases the likelihood that they will delay or forgo necessary care. Balch notes that patients are increasingly forced to decide between paying rent, utilities, or groceries and covering the remaining costs of their healthcare.

These financial trade-offs have serious clinical and economic consequences. When patients postpone or skip treatment due to cost, diseases can progress, complications become more severe, and interventions become more complex, less effective, and more expensive over time. What initially appears as a short-term cost-saving decision ultimately leads to higher overall healthcare spending and worse health outcomes.

Balch’s perspective underscores the broader affordability crisis facing working families and highlights how rising premiums and out-of-pocket costs are eroding the ability of patients to remain insured, stay adherent to treatment, and maintain financial stability while managing serious illness.

He also discussed the policy solutions that advocates should prioritize and much more.

A transcript of his conversation with PC can be found below.

PC: It’s no secret that being able to afford healthcare out of pocket is a major undertaking, and that is where health insurance comes into play. Could you describe the challenge of affording the true cost of health insurance, and how it’s subsidized?

Balch: We have to remember that we have decided to use insurance as our primary financial payment and affordability mechanism in the United States. I'm not saying that's right or wrong. That's just a reality. Insurance only works if everybody is insured, and the system is just based on that fundamental assumption that you're going to have insurance, so you do want a situation where everybody has some form of insurance.

The challenge is, no one can afford healthcare. I shouldn't say no one—most people can't afford healthcare, truly out of pocket. That's why we have insurance, but even when they have insurance, people can't afford insurance, the true cost of it. So everybody, for the most part, who has insurance, it's most likely subsidized in some way. This idea that only one segment of the marketplace has this subsidized insurance coverage, and everybody else is paying full freight—that's false premise, because even in employer-sponsored health plans, just take premiums for example, the average employer pays 84% of their employees’ premiums.

So you already have a significant subsidy in the employer-sponsored market for the whole insurance package, but for premiums in particular, as well. If you look at Medicare Advantage plans, there's $11 billion worth of subsidies towards Medicare Advantage plans to help subsidize the cost of those plans. There's a $5 billion demonstration project right now in Medicare to subsidize premiums in Medicare—you already have a bonus of patients in Medicaid as well as a low-income subsidy, obviously, who have subsidies to afford their health insurance as well.

It's pretty standard for there to be some assistance, whether it's provided by the employer or through government or some other means, to subsidize the cost of insurance to the individual, because very few individuals can afford to just buy a health insurance plan and pay for it. That's why you have the exchanges in the first place is they provided a path for a segment of the population who didn't have access to employer-sponsored insurance, didn't qualify for Medicaid or Medicare, and so we had to create a path for those individuals so that they could be insured.

In order to do that, you have to provide some subsidy to afford that. So that's sort of step number one is we have to remember that insurance is the key to access. The way the system is structured assumes some form of insurance, and almost everyone who has insurance, it is subsidized in some way at the individual level, so individuals are rarely exposed to the full cost of health insurance. Someone is subsidizing—to some extent—the cost of that health insurance.