Sep 19, 2017

Workers are shouldering more of their health care costs

Annual premiums for more than 150 million Americans who get health insurance through their jobs increased only 3% on average this year, according to the latest employer survey data from the Kaiser Family Foundation and the Health Research & Educational Trust.

Yes, but: The tiny uptick was a shade higher than inflation and growth in wages, meaning health care is still eating a growing share of people's paychecks. The data also show that workers are shouldering a lot of those premium increases and are continuing to pay more out of pocket — indicating a steady, slow erosion of employer-based health insurance.

The gritty details: The slow premium growth is good news for employees and companies, and it contrasts sharply with the Affordable Care Act marketplaces, which are separate from employer offerings and are facing much higher premium increases largely due to the uncertainty coming out of Washington.

Employer premiums have increased just 19% from 2012 to 2017, much lower than previous five-year spans. But that again has still been higher than the 6% inflation rate and 12% wage growth rate over the same time frame, according to the KFF/HRET survey data.

Despite the slow premium growth, employees have been bearing more of those costs over the past couple years:

  • The average premium of job-based coverage for a family in 2017 was $18,764, up 3.4% from 2016. The average premium for an individual this year was 4% higher at $6,690.
  • Employers paid for about 70% of that cost, but they have been passing more of the premium increases onto workers.
  • The amount companies paid toward family coverage only went up 1.4% in 2017, compared with 8.3% for employees. That's money that could have gone toward salaries.
  • The average annual deductible for families topped $1,500 this year and remained stagnant for individuals at $1,221.

Behind the trends: Health economists and policymakers have advocated for reducing the generosity of employer-based coverage, which they say encourages overconsumption of health care services and enjoys the largest tax break in the federal tax code. Companies have responded by offering high-deductible options and sometimes pairing those plans with tax-advantaged health savings accounts.

But higher deductibles and other forms of cost-sharing have increasingly exposed people to big bills from hospitals and doctors as well as high drug prices. Critics also say health savings accounts, which have spawned a separate industry, benefit high-income earners who can afford to set money aside tax-free.

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