Survey: Health insurance costs outpace wage gains

Workers saw a modest rise in the average cost of employer-sponsored health insurance this year, but they're probably not overwhelmed with relief.

Coverage costs still are climbing faster than wages. That means, in many cases, a bigger portion of the average paycheck is sliced off for insurance instead of being deposited into employee bank accounts.

Annual premiums for employer-sponsored family coverage climbed nearly 4 percent this year, to top $16,000 for the first time, according to a survey the Kaiser Family Foundation released Tuesday.

The cost of single coverage rose almost 5 percent compared with 2012. Those are smaller increases than the spikes of 9 percent for family coverage and 8 percent for single coverage recorded in 2011. But this year's increases lap a 1.8-percent rise in worker wages over the same period.

Plus, more companies are giving their employees coverage with a higher deductible, which requires a patient to pay more out of pocket for things like blood tests or MRIs before coverage starts. Coupled with the growing cost of coverage, that means some employees may be paying more for insurance that covers less.

While health care costs have generally grown more moderately since the Great Recession eased, the average worker still feels the pain of paying more, said Drew Altman, CEO of the nonprofit Kaiser Family Foundation, which conducts the survey on coverage costs with the Health Research and Educational Trust.

"Their costs are going up, their cost-sharing is going up, wages are flat and inflation is much lower," Altman said.

Employer-sponsored health insurance is the most common form of coverage in the United States. Employers typically cover most of the health insurance bill for their workers, and the actual change a worker sees in health insurance costs can vary greatly.

Some employers absorb cost hikes for their workers. Rate changes also depend on where the employee lives, the coverage he or she has and the size of the employer. Employees of smaller companies tend to see bigger cost fluctuations in part because those businesses have less leverage for rate negotiations.

Smaller employers also are turning more to high-deductible plans to help control insurance cost growth. These plans can cost less for the employer and shift more of the expense to the employee.

More than half of companies with fewer than 200 employees offered insurance with an annual deductible of $1,000 or greater this year for single coverage, according to the Kaiser survey. That's up from 16 percent in 2006.

Jewelry design business Thomas Michaels Designers Inc. offers employee health insurance with a $5,000 deductible. The plan covers only four people, but co-owner Nora Michaels said the annual premium totals $22,000 and eats up about 20 percent of the Camden, Maine, company's budget.

Michaels said she plans to look into whether her employees can get a better deal through the health care overhaul and its upcoming coverage expansions. The federal overhaul will expand coverage next year to millions of uninsured people in part by providing income-based tax credits to help customers buy insurance through exchanges if they can't get affordable coverage through an employer.

Michaels said her coverage costs, which have grown for several years, prevent her from raising pay.

"There's a lot of things we don't do because we have to pay that kind of premium," she said. "It kind of stifles business."

Kaiser's study doesn't make forecasts about 2014, but lead author Gary Claxton said premium increases will likely be moderate next year, too. Altman, Kaiser's CEO, said the cost increases aren't big enough to force employers to make big changes in the coverage they offer.

"There really is no reason for employers to be radically whacking away at health coverage or health benefits in a slow health care cost environment like this," he said.

But expect high-deductible plans to grow. A total of 38 percent of all workers with single coverage have a deductible of at least $1,000 this year. That compares with 10 percent in 2006.

These deductibles can help employers avoid an overhaul-mandated tax on expensive plans that starts in 2018, said Paul Fronstin, an economist with the nonprofit Employee Benefit Research Institute who wasn't involved in the Kaiser study.