The average cost of family coverage in employer health plans pushed above the $20,000 mark for the first time this year, according to a new report, as the 5% average increase in premiums exceeded the growth rate for wages and general inflation.
Low-wage workers face unique challenges, the study found, since they are less likely to be offered employer coverage and must pay a larger share of the premium when they have the chance to buy it.
The numbers come from an annual national survey by the California-based Kaiser Family Foundation on cost trends for employer health plan coverage, the market where about 153 million Americans obtain health insurance via private-sector carriers.
“The average family premium is now $20,000, so that’s a milestone — not, obviously, in a good way,” said Drew Altman, the foundation’s president, in a news conference on Wednesday. “It’s as expensive as buying an economy car, but buying it every year.”
Employer-sponsored health plans are the single-largest category of health insurance in the country, providing coverage to more people than the Medicare or Medicaid programs.
The coverage has been highlighted by some Democratic presidential candidates who are proposing a “Medicare for All” system that would be run by the federal government. The political debate focuses on expanding access to care but seldom hits the cost issues highlighted by the survey, Altman said. He added: “92 percent of Americans have coverage, and they’re worried about the cost of their coverage.”
The political debate also tends to treat employer-sponsored coverage in stark terms — some say it is good, others say it is bad — but the survey shows the quality of coverage is not monolithic, Altman said.
“The sharpest split … is between workers in low- and higher-wage firms, who really are living in different health insurance systems,” he said. Costs are “prohibitive,” Altman said, when workers making $25,000 a year must pay $7,000 a year just for their share of family premiums.
The annual survey from the Kaiser Family Foundation does not break out results for individual states, although some Minnesota employers provided information for the survey.
Average premiums might be somewhat lower in Minnesota because the state has a relatively large number of employers offering high-deductible health plans, said Bob Stein, a benefits consultant with Armbruster Executive & Employee Benefits in Oakdale. High-deductible plans typically come with lower premiums and include Health Savings Accounts, often with funds contributed by employers.
Minnesota employers are covering a relatively high share of the total premium cost, Stein added, because low unemployment in the state means more competition for workers.
The Kaiser survey found that employees this year are covering an average of $6,015 in premium costs for family coverage, a sum that is up 71% since 2009. After factoring the average employer contribution, the average total premium for family coverage this year is $20,576, an increase of 54% since 2009.
Wages during the time period have grown by 26% while inflation has grown 20%.
This year’s 5% growth rate in family premiums continues a recent trend of relatively moderate increases since 2012, compared with annual increases during the previous decade that sometimes were measured in double-digits. Even so, the dollars have become so large that the increases are painful for consumers.
Recent polling that shows 40% of nonelderly adults with employer-based coverage said that they or a family member had difficulty affording health insurance or health care, or had trouble paying medical bills, the Kaiser Family Foundation researchers noted. Roughly one in two surveyed said they or a family member had skipped or postponed care or medications in the past 12 months due to costs.
Lack of cost-control efforts
“Although premium growth has been low, it still exceeds inflation, and the prices employer plans pay for care are rising faster than either Medicare or Medicaid,” researchers wrote in a summary of findings. “One side of the coin calls this a cost shift from public plans to private payers; the other side suggests a lack of any real cost-control efforts in private plans.”
The average annual deductible held roughly steady this year at about $1,655, the report found, but that is roughly double the $826 average from a decade ago. More workers now must pay a deductible, as well.
“There’s a bit of a double whammy because deductibles and out-of-pocket limits are increasing, but premiums are also increasing,” said Dave Delahanty, a benefits consultant in Minneapolis with Aon. “It means that higher health care users are paying more in premiums and out-of-pocket costs.”
Nine percent of firms surveyed said the elimination of penalties for people who lack health insurance prompted fewer workers and dependents this year to enroll in coverage. The federal Affordable Care Act (ACA) included a mandate for individuals to obtain insurance, but a tax law passed by Republicans in late 2017 halted enforcement starting this year.
About 57% of employers offer health benefits and the rate has held roughly steady in recent years, according to the report. Large employers are more likely to offer coverage than small firms, which cite costs as a primary barrier.
While health insurance policies for individuals that comply with ACA rules often include “narrow networks” of doctors and hospitals to control costs, only 5% of employers surveyed said they offer a narrow-network health plan.
“Negotiating lower prices means that plans have to be willing to tell higher-priced providers they cannot be in the network, but as the survey findings show, narrowing networks is both unpopular with employers and, due to dispersed workforces and rural challenges, impractical for many,” researchers wrote.
The survey was conducted between January and July and included responses from 2,012 public-sector and private employers with three or more employees. Another 2,383 firms responded to a single question about offering coverage.
“Employer-sponsored coverage doesn’t come cheap for employers or workers, and many who work at low-wage firms or small business likely find it too costly to cover their families,” said Gary Claxton, a researcher at the foundation, in a statement.