Workers’ Share of Health Premiums Jumps

Twenty-five percent of covered workers now have annual deductibles of $1,000 or more.

September 20, 2010

Workers are paying nearly $4,000 this year on average toward the cost of family health coverage—an increase of 14%, or $482, above what they paid last year, according to the benchmark 2010 Employer Health Benefits Survey released today by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET).

The jump occurred even though the total premiums for family coverage, including what employers contribute, rose a modest 3% to $13,770 on average in 2010, the survey found. In contrast, the amount employers contribute for family coverage did not increase.

Preferred provider organizations (PPOs) continue to dominate the employer market, enrolling 58% of covered workers. Average PPO family premiums topped $14,000 annually in 2010.

Since 2005, workers’ contributions to premiums have gone up 47%, while overall premiums rose 27%, wages increased 18%, and inflation rose 12%.

Many employers are also increasing the annual deductibles workers must pay before their health plans begin, to share most health-care costs. Some 27% of covered workers now face annual deductibles of at least $1,000, up from 22% in 2009, the survey finds.

Among small firms (three to 199 workers), 46% face such deductibles.

“With the economy struggling, businesses have been shifting more of the costs of health insurance to workers through premiums, deductibles, and other cost-sharing,” says Kaiser President/CEO Drew Altman. “This may be helping to stem the rapid rise in premiums that we saw in the early 2000s, but it also means employer coverage is less comprehensive. From a consumer perspective, the cost of health insurance just keeps going up faster than wages.”

The recession contributed to the shift in burden to workers. In response to the economic downturn, 30% of employers say they reduced the scope of health benefits or increased cost-sharing, and 23% report increasing the amount employees pay for coverage, the survey finds.

Among other plan types, only consumer-driven plans (which are high-deductible plans that also include tax-preferred savings options such as a health savings account or health reimbursement arrangement) saw growth in their market share. Such plans now enroll 13% of covered workers, up from 8% last year.

“Consumer-driven plans have clearly established a foothold in the employer market, tripling their market share from 4% in 2006 to 13% today,” notes study lead author Gary Claxton, a Kaiser vice president and director of the Healthcare Marketplace Project.

Surprisingly, the survey saw the percentage of firms offering health benefits in 2010 increase sharply to 69% —up from 60% in 2009—largely because of an increase in the offer rate among firms with three to nine workers.

Because most workers are employed by large firms, the shift among the smallest firms did not have a major effect on either the percentage of workers offered health benefits or the percentage of workers covered at their jobs.