The cost of employer-sponsored health insurance is on the rise in the United States, according to recent data. The Kaiser Family Foundation (KFF) conducted its 25th Employer Health Benefits Survey, which revealed that as of July 2023, the average annual premium for individual coverage was $8,435, while family coverage averaged $23,968. These figures represent a 7% increase in premiums compared to the previous year.
In addition to rising premiums, employees are also contributing more to their health insurance costs. In 1999, workers paid $318, or 14.4% of the average annual premium of $2,196 for individual coverage. However, by 2023, employee contributions had increased to $1,401 out of the total premium of $8,435, accounting for 16.6% of the overall cost.
Andrea Ducas, the Vice President of Health Policy at the Center for American Progress, highlighted the financial strain that both employers and employees face in affording health insurance. She stated, “I think it just sort of demonstrates the continued strain that employees and employers are facing when it comes to being able to afford to both offer health insurance to employees and then for employees to afford that coverage.”
The rising cost of healthcare in the US is a major concern. A survey conducted in October 2023 by the Commonwealth Fund found that 38% of US adults had delayed or skipped healthcare or prescription drugs in the past year due to affordability issues. This included 54% of those with employer-sponsored coverage. Matthew Rae, the Associate Director of the healthcare marketplace project at KFF, explained that cost-sharing provisions required by employer-sponsored health plans create affordability issues for individuals, particularly low-wage workers.
Several factors contribute to the increasing cost of health insurance. Insurance companies determine premiums based on projected spending for a specific insured population, taking into account healthcare utilization rates and the cost of care. Inflation also plays a role, affecting the affordability of healthcare for many families. The Commonwealth Fund survey revealed that 60% of individuals with employer-sponsored coverage reported that price inflation had impacted their ability to afford healthcare, with those earning less than 200% of the federal poverty level being the most affected.
Rae suggested that the rise in premiums could be attributed to increased healthcare utilization following the pandemic, as well as the introduction of more expensive treatments. He also noted that consolidated healthcare markets, where providers have more bargaining power, contribute to higher premium costs.
The tight labor market also contributes to the rise in premium costs. Employers strive to attract talent by offering comprehensive benefits, leading to higher premiums. Rae emphasized the significance of the labor market, stating, “The labor market really matters here.” Despite the increasing premiums, the growth in deductible costs has slowed in recent years. The average deductible for single coverage in 2023 was $1,735, only 10% higher than five years ago.
The KFF survey found that 90% of US workers have a deductible, compared to 55% in 2006, highlighting the increasing complexity of cost-sharing. Concerns about the affordability of cost-sharing were expressed by 25% of employers with 50 or more employees, while 33% believed their employees had a moderate level of concern.
The affordability of healthcare coverage is becoming increasingly challenging for individuals, and employers are finding it harder to offer comprehensive plans. Ducas remarked, “It’s becoming so unaffordable for people to use their coverage, and it’s becoming harder and harder for employers to offer it. And there’s so much that needs to happen to bring down the cost of care.”
In conclusion, employer-sponsored health insurance in the US is becoming more expensive, with both premiums and employee contributions on the rise. The affordability of healthcare remains a major issue, impacting individuals across different income levels. The cost of care, healthcare utilization rates, inflation, and a tight labor market all contribute to the increasing premiums.
