Cost of Employer-Backed Health Insurance Rises Moderately

Cost of Employer-Backed Health Insurance Rises Moderately

The average cost of an employer-provided family health insurance plan rose to over $18,000 this year, the Wall Street Journal reports:

Annual premium cost rose 3% to $18,142 for an employer family plan in 2016, from $17,545 last year, according to the annual poll of employers performed by the nonprofit Kaiser Family Foundation along with the Health Research & Educational Trust, a nonprofit affiliated with the American Hospital Association. Employees paid 30% of the premiums for a family plan in 2016, compared with 29% last year, according to Kaiser. For an individual worker, the average annual cost of employer coverage was $6,435 in this year’s survey, with employees paying 18% of that total. The change in annual premium for individual coverage from 2015 wasn’t statistically significant.

Economists have long debated the reasons for the slow pace of growth in premiums, which has continued for several years. Some have argued that the limited rate of increase is primarily linked to aftereffects of the recession and continued economic uncertainty. But the newest Kaiser survey highlights the effects of another shift: the continuing growth of plans that involve higher out-of-pocket costs in the form of deductibles.

“In the messy, expensive U.S. health care system, such small increases constitute a positive development,” the Huffington Post’s Jeffrey Young writes, adding that this has nothing to do with the recent challenges facing the Affordable Care Act’s individual insurance exchanges:

This is happening because health care keeps getting more expensive ― a trend that began long before the Affordable Care Act was enacted. Higher costs are the main driver of rising premiums and larger deductibles. But the employer insurance market isn’t struggling with other problems that plague the Obamacare market. Perhaps most importantly, the employer market covers a sustainable mix of healthy and sick customers, unlike the Affordable Care Act exchanges.

All the attention lately on Obamacare’s challenges makes it easy to forget that most Americans don’t get their health coverage that way. Despite a widespread public misconception, none of its issues affect health care costs and benefits for the vast majority of people.

At the Washington Post, Carolyn Johnson digs deeper into the growing popularity of high-deductible plans:

During the past five years, deductibles have grown 10 times as fast as inflation and nearly six times as fast as wages, according to the new report. For the first time, employer-sponsored health plans also reached a new benchmark: Half of all workers who receive insurance through their employers faced a deductible of at least $1,000 a year for individual coverage — up from just 10 percent of workers in 2006, according to the survey by the Kaiser Family Foundation and Health Research & Educational Trust. The average deductible for individuals in firms with fewer than 200 employees is $2,069. …

Although the Affordable Care Act included a cap on out-of-pocket spending for plans sold through the marketplaces, there are no such rules for insurance offered on the employer market. There has been a furor over the premium hikes and the stability of the marketplaces, where roughly 11 million Americans receive coverage. But far less attention has been paid to how deductibles are shaping the spending — and health — of the large number of Americans with employer-based insurance.

Meanwhile, Ross Kelly at Chief Executive takes a look at a new survey finding that employers expect health care costs to rise more steeply in 2017:

After polling leaders at 1,277 companies, human resources consultancy Mercer said underlying employee health care costs are expected to rise by 5.5% in 2017. The final rate will drop to 4% after employers make changes, such as raising deductibles or switching carriers, it said.

Such an increase from 2016 compares favorably with those of more than 10% for individual coverage offered on public exchanges via the Affordable Care Act (aka Obamacare). California’s ACA premiums for individuals, for example, will jump 13.2% next year, according to Covered California. The much lower growth rate for employers, however, is still too high, Tracy Watts, a senior partner at Mercer, said. “This is an impressive achievement during a time when the ACA demanded so much attention, but with health benefit cost increases still double or triple inflation, we can’t declare the problem solved,” Watts said.