Employers Paying More, Workers Getting Less for Health Insurance

The price businesses pay for their workers’ health insurance has ballooned more than 41 percent over the past six years, according to a new study by the Commonwealth Fund. At the same time, many workers are getting less for the money — per-person deductibles have risen 71 percent over those same years, according to the report.

In 2009, the average family health plan in the U.S. cost $13,027. In some of the most expensive states — Massachusetts, Vermont, Wyoming and Wisconsin — the average plan cost more than $14,000. In the least expensive state, Arkansas, it was just under $11,000.

“No matter where you live in the U.S., whether Montana, Texas, Mississippi, or New York, health insurance is expensive,” Cathy Schoen, Commonwealth Fund Senior Vice President and the lead author of the report, told reporters.

The staggering premium increases don’t usually hit consumers directly, because most employers pay about three-quarters of a plan’s premium price. But, Schoen says, workers have felt the increases nonetheless, as employers have held salaries stagnant to keep up with the rising health insurance costs.

“In effect, workers and their families with insurance have been giving up wages to hold on to their health insurance,” Schoen says.

In fact, one recent survey suggests that companies are beginning to shift more of the cost of health insurance directly onto their workers. The Commonwealth Fund report is based on federal data that only go through 2009. But a recent survey of more than 2,000 employers released in September by the Kaiser Family Foundation found that employers’ health insurance premium costs went up by 3 percent in 2010, but the amount paid directly by employees rose 14 percent.

The squeeze is particularly acute in the south and southwest, according to the report, where premiums are slightly below the national average — but average wages are even further below. So health insurance in those states makes up a bigger percentage of workers’ average total compensation. In 2003, health insurance premiums were higher than 18 percent of the median salary in three states. By 2009, that was true in 26 states — including nearly every state in the south and southwest.

In addition to paying more in premiums, workers are also paying higher deductibles. The average family-plan deductible for employees at large companies rose from $969 in 2003 to $1,610 in 2009.

Paul Fronstin, director of the health research program at the Employee Benefits Research Institute, says it would have also been interesting to take a detailed look at how those costs are rising. Some employers, he says, are trying to manage costs in “value-based” ways — for example, by offering no-deductible primary care office visits, but raising deductibles for specialist care, to encourage people to get primary care treatment.

“So [deductibles] may have been going up overall, but the interesting thing for me is what’s happening in cost-sharing,” Fronstin says.

In the report, the authors from the Commonwealth Fund — which supports the new health reform law — also calculate the future cost of insurance premiums if prices keep rising at the same rate that they have been for the past six years. They found that by 2020, the average premium would reach $23,342 per year.

If the changes in the health reform law manage to reduce the rate of cost growth by 1.5 percent, the average premium would reach $19,938 per year. The report’s authors believe that that is possible, because of provisions in the law that, for example, limit the percentage of premiums that can go to insurance company profit, establish health insurance exchanges where small businesses can comparison-shop for coverage, and test new ways of paying health care providers.

But not all analysts agree that reform will lower costs. In fact, whether the law will “bend the cost curve” and lower health care spending — and health insurance premiums — is one of the main debates around the new law.