Employer-sponsored plans taking a greater share of employee income than ever before

National Trends in the Cost of Employer Health Insurance Coverage, 2003–2013

By Sara R. Collins, David Radley, Cathy Schoen, Sophie Beutel
The Commonwealth Fund, December 9, 2014

Looking at trends in private employer-based health insurance from 2003 to 2013, this issue brief finds that premiums for family coverage increased 73 percent over the past decade—faster than median family income. Employees’ contributions to their premiums climbed by 93 percent over that time frame. At the same time, deductibles more than doubled in both large and small firms. Workers are thus paying more but getting less protective benefits. However, the study also finds that while premiums continued to rise through 2013, the rate of growth slowed between 2010 and 2013, following implementation of the Affordable Care Act. While families experienced slower growth in premium contributions and deductibles over this period, sluggish growth in median family income means families are paying more in premiums and deductibles as a share of their income than ever before.

Premium Increases Outpace Growth in Family Income

Despite the recent slowdown in growth, insurance premiums have risen faster than median incomes for the under-65 population. While average family premiums have climbed by 73 percent since 2003, median family income has risen by 16 percent over the same time period. As a result, total premiums (including the employer and employee shares) relative to income have continued to climb for middle-income working-age families. In 2013, average annual family premiums were 23 percent of median family income, up from 15 percent in 2003 and 21 percent in 2010. There are similar trends in premiums for single coverage: average premiums have climbed 60 percent over the decade, while median income for single-person households has grown by only 11 percent.

Although workers are paying more for their health insurance, their premiums are buying less financial protection, partly because more plans include deductibles and the size of those deductibles has spiked dramatically. In 2013, 81 percent of workers were enrolled in a health plan with a deductible, up from 78 percent in 2010 and just over half (52%) in 2003. As with employee contributions to premiums, incomes have lagged growth in deductibles such that deductibles are consuming an ever-growing share of worker income.

Research has shown that the slower growth in wages during the past decade has been part of a trade-off to preserve health benefits. But while growth in premiums and deductibles has slowed over 2010–2013, median family income, when adjusted for inflation, remains below 2010 levels. Indeed, U.S. families are still trying to recapture lost income from the financial crisis and recession of 2008: real median income is 8 percent lower than it was in 2007. It is unlikely that most families at the middle and lower end of the income distribution are able to detect or feel the premium slowdown in their pocketbooks since they are paying more in premiums and deductibles as a share of their income than ever before.



By Don McCanne, MD

Both premiums for employer-sponsored health plans and employee out-of-pocket expenses for health care have continued to increase well in excess of employee income, in spite of a general slowing in health care spending. Employees “are paying more in premiums and deductibles as a share of their income than ever before,” and it is likely that there is no relief in site, in spite of the enactment of the Affordable Care Act.

We desperately need public policies to correct the excessive and increasing inequality in America, and a good start would be to replace our current inequitable health care financing system with an equitably-financed and more efficient single payer national health program - an improved Medicare that covers everyone.