Employers’ solution to rising health costs: Make employees foot the bill

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Employees are footing more of the bill for their employer-sponsored health insurance, a survey from Kaiser Family Foundation says, reflecting a troubling seven-year trend where wages continually fail to match the rising costs of healthcare.

While employers are responsible for the bulk of healthcare expenses, more companies are increasing the annual amount employees are expected to pay before coverage begins in the form of annual deductibles, the survey finds. But employers and insurance providers are not to blame for the rising costs — an unregulated healthcare market is, according to industry experts.

“Absent government regulation is an ongoing war that works out differently in different parts of the country,” says KFF President and CEO Drew Altman. “Health providers are largely winning that war when it comes to prices.”

Both family and single payer plans increased this year, according to Kaiser’s research. Family premiums increased to an average of $19,616, a 5% spike from last year, with employees contributing $5,547. Single payer rates rose 3% to a total of $6,896, with employees contributing an average of $1,186 — money they could have taken home. Since 2008, average family premiums have increased 55%, twice as fast as workers’ earnings (26%) and three times as fast as inflation (17%).

Though employers negotiate with insurance providers to provide health coverage for employees, insurance rates are subject to the healthcare market’s prices, which are constantly increasing. A typical family premium now costs nearly the same as buying a new Honda Civic every year, Altman says.

“It’s a market-based system, so we’re left with insurers paying what the health systems want,” says study lead author Gary Claxton, a KFF vice president and director of the Health Care Marketplace Project.

As premium rates increase, employers are relying on their workforce to fill the gap, Altman says. Some employers make arrangements for employees to pay for healthcare using a percentage of their salary that goes untaxed. It’s thought to lessen the blow of rising deductibles, but employees are still bringing home less personal income.

“Deductibles of $2,000 or more are increasingly common in employer plans, which means the bills can pile up quickly for workers who require significant medical care,” Claxton says.

In the last decade, family premiums increased twice as fast as wages, according to the Kaiser Family Foundation. This year, wages increased 2.6%, compared to the 5% and 3% increases for family and single coverage. But the cost of health insurance is even surpassing inflation rates. Family premium rates were three times higher than inflation within the past decade, the survey says. Inflation increased by 2.5% this year, lower than both wages and premium costs.

“Rising healthcare costs are absolutely a problem for companies, but they’re an even bigger problem for the workforce,” Altman says. “Premiums are increasing at a moderate rate, which isn’t a crisis, but rather an ongoing headache for employers. Meanwhile, it’s a serious dent in employee’s take-home pay.”

The San Francisco based nonprofit surveyed 4,070 random non-federal public and private sector employers for this survey. Its statistics were pulled from answers to online questionnaires that were distributed to employees during the first half of this year.

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