Industry Market Trends

Employer Health Care Costs to Rise in 2013

Oct 02, 2012

The cost of health insurance premiums provided by employers rose slightly this year, outpacing gains in worker wages and inflation. Moreover, coverage costs are expected to rise again in 2013, new research shows.

A new report from the Kaiser Family Foundation and Health Research & Educational Trust,  reveals that the average cost for a family health care plan offered by employers in 2012 jumped by 4 percent to $15,745 from last year's $15,073, while single coverage rose by 3 percent to $5,615. The 2012 Employer Health Benefits Survey is based on responses from 2,121 employers of non-federal public and private firms with three or more workers.

While the year-to-year increase is modest in comparison to a 9 percent premium jump in 2011, the slight upswing this year is still outpacing wage growth, which has risen just 1.7 percent.

Kaiser also revealed that annual premiums have fluctuated greatly over the past decade. In 2012, the annual family premium is 30 percent higher than in 2007 and 97 percent higher than the average annual family premium 10 years ago.

Experts attribute the recession and a slow economy to the lower rate of premium increase, as employers spend less in comparison with previous years, when the cost increases were more significant, the New York Times notes.

Health care costs remain a primary concern for firms and a determining factor in benefits coverage. The Kaiser report notes that among small firms that do not offer benefits, "48 percent cite high cost as the most important reason for not doing so."

Although most firms (61 percent) offered health insurance in 2012, the size of a business can be an accurate indicator of coverage levels. Just 50 percent of small businesses with 3 to 9 workers offer benefits, compared to 73 percent of firms with 10 to 24 employees. Almost all (94 percent) of the largest companies - those with 50 to 199 employees - offer benefits in 2012.

There is also a divide in health insurance premiums between firms with lower-wage workers and those with higher-wage workers. While 64 percent of firms with high-wage staff members offer health insurance, 28 percent of companies with a large number of lower-wage workers offer benefits.

On average, employees in firms with lower-wage workers paid $1,000 more per year for family coverage than workers in businesses with higher-paying roles.

"Firms with many lower-wage workers ask employees to pay more out of pocket than firms with many higher-wage workers even though the coverage itself tends to be less comprehensive," Gary Claxton, vice president and director of the Kaiser Foundation's Health Care Marketplace Project, added.

With health care costs a central issue during election season, experts have been evaluating the underlying costs of the Patient Protection and Affordable Care Act (PPACA), also known as "Obamacare." For example, health care reform bans deductibles over $2,000 for single coverage, which means that 27 percent of those in small firms will be forced into a government-approved plan, ultimately paying higher costs, Forbes explains.

Additionally, those who are opposed to the Affordable Care Act are unlikely to be persuaded even by a slight rise in premium costs, as the bill was intended to cut premiums altogether, NPR notes.

The modest 2012 premium increase may not be carried over into 2013, as firms consider new coverage options or raise deductibles. In 2012, most employers (54 percent) who offer insurance coverage shopped for new plans - which could change rates substantially in years to come. Business Finance Mag also points out a survey by Mercer, which indicates that a majority of employers would face an increase in health care costs "averaging 8 percent in 2013 if they make no changes to their plans."