The annual cost for a family to get health coverage from an employer plan rose 5% to $19,616 this year, according to recently released data from the nonprofit Kaiser Family Foundation. The cost to cover an individual on a job-based plan is now $6,896, up 3% from last year.
Employers cover the majority of this expense, but people end up paying for the benefit in different ways as rates continue to rise: The expense is passed along through higher cost sharing for visits and hospitalizations, and more of their compensation is coming in the form of health insurance instead of wages.
“Rapid growth in the cost of US health care has put sustained downward pressure on wages and incomes,” a new report by the Economic Policy Institute, a liberal nonprofit, found.
It’s a tremendous understatement to say that health insurance is insanely expensive — and even if you pay just a portion of the full cost, you’re often still spending thousands of dollars on it every year.
Workers contributed $5,547 for family coverage on average in 2018, up 65% since 2008, and $1,186 for single coverage, according to Kaiser. Employers paid the rest of the premium (the industry term for the cost of the insurance). On average, workers contributed 29% of the premium for family coverage and 18% of the premium for single coverage. On top of the cost of the plan, the average family of four pays another $4,700 in out-of-pocket expenses every year, according to the Milliman Medical Index.
The shocking cost of health care is a reality that many people and their employers are confronting as the enrollment period for 2019 plans approaches.
“It’s a big challenge for young people,” Matthew Rae, a senior health policy analyst at Kaiser, said to BuzzFeed News. Apart from the costs alone, “We spend a lot on health care, but we don’t see better [health] outcomes.” The US outspends other countries on health care, but has fallen behind on life expectancy, for instance.
“I would summarize it as unsustainable,” said Ben Isgur, leader of the Health Research Institute at PricewaterhouseCoopers US. Many millennials in particular still have other high expenses, such as paying off student loans. “For some people, it’s definitely a crisis, because it’s unaffordable. For some companies, it can be a crisis too.” PWC expects employer medical costs to rise another 6% in 2019.
The cost of job-based health insurance has increased dramatically over the last two decades. According to Kaiser, “since 2008, average family premiums have increased 55%, twice as fast as workers’ earnings (26%) and three times as fast as inflation (17%).” Back in 1999, family coverage cost just $5,791.
Sadly, recent trends count as good news in the health care industry: While the rate increase in 2018 still outpaces growth in wages, it’s lower than it has been in previous years. Every year from 2001 to 2004, for instance, premiums rose by more than 10% annually.
This is cold comfort at best, since the main reason the rate increase has slowed is because more workers are moving to high-deductible plans, in which the insurer requires members to spend a higher amount of their own money out of pocket — even for doctor’s visits and prescriptions — before it starts to pay for anything. The average deductible for single coverage is $1,573 now, up more than 50% from 2013 and more than 200% from 2008.
For a family PPO (Preferred Provider Organization) plan — PPOs have a network of providers that agree to lower payments in exchange for access to patients on that insurance plan — the average deductible was $3,000, according to Kaiser’s report.
And while out-of-pocket caps — implemented by President Obama’s Affordable Care Act — remain in place even as the Trump administration changes other aspects of the law, the cap is rising next year from $7,350 to $7,900 for individual coverage, and from $14,700 to $15,800 for all other coverage (the cap is lower on high-deductible plans).
Asked why the cost of health insurance in the US continues to rise faster than wages, Isgur said, “A lot of things cost more than they would in the rest of the world: the income of doctors, what the hospitals make, what the insurers make. The whole ecosystem has a higher price here than in other parts. There’s not a single villain in the story.”
Questions remain about how the ACA has impacted employer-based health care premiums, though the law’s main impact is on individual plans on the exchanges rather than on group plans. “So much of the ACA has been studied and analyzed, but we could find no research that has attempted to tease out how much of the [relatively] low growth in employer premiums since 2011 could be attributable to the health care law,” according to Factcheck.org.
People rely on their employers to share the rising expense of heath care, but it’s a costly benefit for companies, and only getting costlier. Whatever money employers are using to subsidize the cost of their employees’ insurance is — theoretically, anyhow — money those workers won’t get directly as salary, according to EPI’s report. It also means that if the share the company subsidizes isn’t significant, or if the company doesn’t subsidize coverage for an employee’s family members, workers face a big sticker price to buy health insurance.
Addressing the cost of health insurance will depend in part on controlling the cost of care. “This is something that policymakers in Washington, health industry execs, consumers, everyone is focused on this right now. Everyone is focused on the cost and prices,” said Isgur.
A sustainable trend in medical costs would “be closer to inflation trends,” he said. “Maybe a little higher for innovation and discovery, but not double or triple.”