Employers have been shifting more premium costs to workers and increasing their deductibles. That, in addition to the fact that price growth in the health sector outpaces growth for the rest of the economy, has resulted in a disproportionate increase in employee out-of-pocket costs, a new Commonwealth Fund report says.
Growth in health plan costs have slowed from 2003 to 2013, giving some relief to employers, but the benefits are not trickling down to workers yet, the authors said.
The report, State Trends in the Cost of Employer Health Insurance Coverage, 2003-2013, looked at annual premium growth trends state-by state over a decade. It separately reviewed the seven years before enactment of the Affordable Care Act and the three years since. It found a slowdown in the rate concurrent with health care reform being in effect. The national growth rate in premiums from 2010 to 2013 was 4.1 percent, compared with 5.1 percent from 2003 to 2010. The report’s authors said ACA provisions limiting premium increases might have helped slow the cost growth of employer-sponsored insurance.
From 2010 to 2013, growth rates in almost all Southern states were below the national average, including: Louisiana, which had no premium growth; Florida, with a 1.7-percent annual rate; and North Carolina, which had a 1.6-percent annual rate. National data indicate that the slow-growth rates continued in 2014.
But in 10 states, premium rates increased 6 percent or more a year. States with the highest annual increases included South Dakota (7.5 percent), Colorado (7 percent), Ohio (6.7 percent) and Indiana (6.7 percent), the authors said in a Jan. 7 teleconference.
Employees Saw Higher Costs
Employees’ out-of-pocket costs for employer-sponsored coverage grew because: (1) their share of premiums increased; and (2) deductibles rose. Combine that with the facts that: (1) salaries remained stagnant; and (2) health inflation outpaced the consumer price index in all 50 states, and one can see why premiums as a percentage of household income increased significantly.
Employee Premium Shares
On a national level, the employee percentage-share of premiums for single coverage increased from 17 percent to 21 percent between 2003 and 2013. In Massachusetts, employees started out paying 20 percent in 2003 and ended up paying 26 percent in 2013; in California, worker shares started at 14 percent and ended at 20 percent; in Nevada, they started at 13 percent and ended at 25 percent. Factoring in the effect of health inflation, workers in those three states in 2013 paid more than 130 percent more dollars for health insurance than they did a decade before. For family coverage, the national average was 25 percent in 2003 and 28 percent in 2013.
Deductibles
Back in 2003, only half of employees contended with deductibles; in 2013, 81 percent did. A marked increase in deductibles is observable in large and small companies alike. High-deductible health plans are now the rule, not the exception, study author Cathy Schoen stated. The national average deductible for single coverage in 2013 was $1,273; also in 2013, average deductibles exceeded $1,000 in all but three states. But in 2003, the average deductible for a single person was just $518 and not one state had an average deductible of more than $1,000.
Costs Take Up Larger Percentage of Income
Health care inflation has outpaced income growth in all 50 states, the authors stated. Slow salary growth combined with the increase in out-of-pocket costs resulted in higher proportional health care costs for workers.
While in 2003, the total cost of employer-sponsored coverage was less than 20 percent of household income in every state but three; in 2013, the full cost of single coverage was between 20 percent and 25 percent of household income in virtually every state. The full cost in seven states was 25 percent or more in 2013, while that was not the situation in any state in 2003.
Out-of-Pocket Burdens Vary
At the national level, employee premium contributions plus deductibles were 5.3 percent of household income in 2003; in 2013, they were 9.6 percent, the study found.
In states with relatively low household incomes, the high cost of care stands out. Because incomes have stagnated, premium increases are more damaging for residents of low-income states. While median salaries vary a lot from state to state, health insurance is expensive in all states, the authors remarked.
In states with lower salaries, health care costs took up a larger proportion of household income. States where workers paid the biggest percentage were Arizona, Florida, Kentucky, Louisiana, Mississippi, Nevada, New Mexico, Oklahoma, Tennessee and Texas; each of which had rates higher than 11 percent.
For more information, see the Guide to Self-insuring Health Benefits