Much of the attention on the rising cost of health care has focused on unsustainable public outlay for programs like Medicare. The federal government — using tax dollars — pays for millions of peoples’ coverage (and, eventually, will chip in for all of our care if we live long enough). The spiraling costs of doctor visits, medicine and surgery for so many people have contributed considerably to the country’s glum economic outlook.
While businesses have been screaming about it, less focus has gone to the cost of employer-sponsored health care, and these rates per person have, in fact, been rising faster than public spending. Americans with employer-provided insurance are often considered the lucky ones. But a new study of how those costs have ballooned and shifted in less than a decade reveals — with startling numbers — that even workers with a good benefits package have reason to worry.
The study, conducted by researchers at the progressive-oriented Commonwealth Fund, tracked the rise in employer-sponsored premiums and deductibles across all 50 states between 2003-2010. During that time, total premiums for family coverage increased 50 percent across the country. The average cost of a family plan in 2010 – split by the employer and employee — was $13,871.
“The percent increase is a pretty substantial increase over that seven-year period,” said Sara Collins, a vice president for the Affordable Health Insurance Program at the Commonwealth Fund, and one of the authors of the study. “But it has to be put in context also with the rate of income growth.”
Other national surveys suggest these costs have been rising three times faster than wages have since 2000. And there are other foreboding trends: employers have been shifting a greater share of these rising costs onto employees, and as those increasingly expensive plans have been offering less coverage.
“The other remarkable piece of this is the fact that even though premiums rose by so much, and families are paying more and contributing more to their premiums,” Collins said, “their deductibles also went up so much.”
A $500-a-month plan, in other words, buys you less coverage when it now comes with a $1,000 deductible (the Commonwealth Fund doesn’t have any way of quantifying the services covered by each plan). And across the country the size of deductibles nearly doubled over this seven-year span, for people working in both large and small companies. In 2003, 52 percent of employees had deductibles. By 2010, 74 percent did. And the average deductible for a single-person plan now tops $1,000.
The annual amount that employees contribute to their own premiums increased by 63 percent — a reflection, Collins speculated, that employers must push more of the cost onto employees to continue offering benefits.
“Putting it in context of where families are in their income growth,” Collins said, “drives home how much of a burden premiums are becoming for families.”
Workers who lose or leave their jobs also face the prospect of paying for the entire cost of premiums by themselves (COBRA insurance allows unemployed workers to temporarily remain under their former employer’s health plan at this higher cost). In 23 states, this means that a median-income family paying the full cost of a premium would have to devote at least 20 percent of its income to health care. In 2003, only one state had this distinction. And the increases have been particularly harsh across the South.
As of 2010, there isn’t a single state where average premiums are less than 14 percent of median income. No wonder, Collins says, that just 14 percent of people eligible for COBRA insurance actually take it.
If these trends continue apace — and in the absence of any of the attempted cost-saving measures included in the health-care bill — the researchers estimate that the cost of an average family plan premium by 2020 will rise by another 72 percent, to nearly $24,000 a year.
But if reforms in the health-care law slow the rate of health-care cost growth by about one percentage point below current trends, by 2020, it could save a family about $2,161 a year.
All of this has implications beyond the world of health care. As these costs eat up a rising share of family income, families will inevitably pull money from investments into education and retirement, and even into day-to-day living expenses. Employers, meanwhile, face rising costs that will cut into resources that could otherwise be spent on raises, new hires or business expansion.
“With rising costs and eroding coverage,” the study’s authors conclude, “much is at stake for the insured and uninsured alike as the nation looks forward.”