Health Insurance Premiums Soar over Last Decade

Over the last decade, average annual premiums workers have paid for family healthcare coverage have shot up 78 percent, while employer contributions rose 51 percent, a new report found.

From 2006 to 2016, the Kaiser Family Foundation survey of 1,900 small and large employers found worker contributions increased from $2,973 to $5,277 while employer contributions rose from $8,508 to $12,865.

Yet despite the rising costs, the survey found few employers reported changing workers’ hours to avoid their responsibilities under the Affordable Care Act. In 2016, the ACA provision requiring employers with at least 50 full-time equivalent employees to offer health benefits to full-time workers or pay a penalty took full effect. The survey found 93 percent of firms with at least 50 employees offered health benefits to at least some employees, and the vast majority said their coverage meets the ACA’s requirements for value and affordability.

In addition, “The survey… finds little evidence that businesses are reducing workers’ hours to avoid the law’s requirements to offer coverage,” according to a Kaiser statement. “In fact, more employers with 50 or more full-time equivalent workers who offer coverage say they shifted or plan to shift workers’ hours from part-time to full-time status to make them eligible for health benefits (7 percent) than say they shifted or plan to shift workers from full-time to part-time status to make them ineligible (2 percent).”

Family Premiums Increased 3 Percent in 2016

The Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2016 Employer Health Benefits Survey found annual family premiums for employer-sponsored health insurance rose an average of 3 percent, to $18,142 in 2016. At the same time, workers’ wages (2.5 percent) and inflation (1.1 percent) grew modestly.

This year’s family premium increase is similar to last year’s (4 percent) and reflects a significant slowdown over the past 15 years. Since 2011, average family premiums have increased 20 percent, more slowly than the previous five years (31 percent increase from 2006 to 2011).

Workers Move into High-Deductible Plans

The trend in part reflects covered workers moving into high-deductible plans compatible with Health Savings Accounts (HSAs) or tied to health reimbursement arrangements (HRAs). These plans have lower average premiums than other plan types.

In 2016, 29 percent of all workers were in such plans, up from 20 percent in 2014, while a shrinking share of workers (48 percent in 2016, down from 58 percent in 2014) are enrolled in preferred provider organization (PPO) plans, which have higher-than-average premiums.

Partly as a result of this trend, the survey found average deductibles continued to rise for covered workers. In 2016, 83 percent of covered workers faced a deductible for single coverage, which averaged $1,478. That’s up $159 or 12 percent from 2015, and $486 or 49 percent since 2011. Among all workers with deductibles, those in small firms (three to 199 employers) have higher average deductibles than those in large firms ($2,069 vs. $1,238).

For the first time, the survey also found that half (51 percent) of all covered workers faced deductibles of at least $1,000 annually for single coverage. This includes two thirds (65 percent) of workers at small firms (three to 199 workers), who typically face higher deductibles than workers at large firms (200 or more workers).

In some cases, employers make contributions to tax-preferred HSAs or HRAs, which workers can use to pay part or all of their deductible expenses, thereby reducing their effective deductible. Counting employer contributions this way would reduce the share of covered workers with deductibles of at least $1,000 to 38 percent.

“The importance of this study is its ability to inform decision makers from all sectors as new or emerging strategies for health care coverage are being constructed,” said Dr. Ken Anderson, Kaiser’s HRET’s chief operating officer.

How does your firm’s health insurance coverage compare to your competitors’ and to other local employers competing for the same labor pool? Contact us for more information and an insurance review.