Rising prices “chiefly tied to rising prices paid for health services.” Yet health care costs have remained essentially static for the past ten years. It’s the prices that have increased, not the cost of health care. – Bill Rusteberg
Deductibles that workers must pay out of their pockets also rose, according to the Kaiser Family Foundation
By Anna Wilde Mathews Updated Oct. 3, 2018
The average cost of employer health coverage offered to workers rose to nearly $20,000 for a family plan this year, according to a new survey, capping years of increases that experts said are chiefly tied to rising prices paid for health services.
Annual premiums rose 5% to $19,616 for an employer-provided family plan in 2018, according to the yearly poll of employers by the nonprofit Kaiser Family Foundation. Employers, seeking to blunt the cost of premiums, also continued to boost the deductibles that workers must pay out of their pockets before insurance kicks in.
“That’s one of the things that lets them reduce premium costs, shifting more of the cost to workers,” said Gary Claxton, a vice president at the Kaiser Family Foundation.
McDonald Gardens LLC, a retailer and landscaping company in the Virginia Beach, Va., area, has about 100 full-time workers. To deal with the rising cost of coverage, it raised the deductible on its most widely used health plan to $4,000 a year, from $3,000. The company also increased its own premium contribution.
Created with Highcharts 6.0.4 Getting Covered Average annual worker and employer contributions to premiums for family health coverage Source: Kaiser Family Foundation
Created with Highcharts 6.0.4 Employer Worker 2000 ’05 ’10 ’15 0 2,500 5,000 7,500 10,000 12,500 15,000 17,500 $20,000
The moves lowered the amount workers have to contribute for insurance out of their paychecks, said Debbie LeMaster, the company’s human-resources manager. “The burden keeps growing on the employees and the employer,” she said.
Nationwide, workers paid $5,547 a year on average in premiums for a family plan in 2018, according to the Kaiser employer survey. That represented 29% of the total premium cost.
In 2017, workers’ average premium contribution for a family plan was $5,714, or 31% of the total cost, slightly higher than this year’s figure but not statistically different, according to Kaiser.
For an individual employer plan, the average total premium cost was $6,896 in the 2018 survey, or 3% higher than last year, with workers paying 18% of the total.
The average 2018 general deductible for individual-worker coverage was $1,573, according to the survey, up from $1,505 last year and $1,135 five years ago. Those averages don’t include plans that lacked such deductibles.
According to Kaiser, workers’ wages went up 2.6% on average and inflation increased 2.5% over the past year.
A major driver of employer premium growth over the years has been the prices that insurers and employers pay for health care, according to Mr. Claxton and other experts. These prices typically are set in negotiations between health insurers and hospitals, doctors and other types of health-care providers.
Created with Highcharts 6.0.4 Out of Pocket Workers are facing higher deductibles in their health insurance Average deductible for single coverage Source: Kaiser Family Foundation
Created with Highcharts 6.0.4 For workers with a deductible For all covered workers 2006 ’08 ’10 ’12 ’14 ’16 ’18 0 250 500 750 1,000 1,250 1,500 $1,750 For workers with a deductible x 2015 x $1,318
A report issued earlier this year by the Health Care Cost Institute, a nonprofit, said that between 2012 and 2016, health spending growth tracked in insurer claims from employer-sponsored coverage “was almost entirely due to price increases,” for services including emergency-room visits, surgical hospital admissions and administered drugs.
The report said that over the same period, “utilization of most health care services remained unchanged or declined.”
Why Americans Spend So Much on Health Care
The HCCI findings are “pretty compelling,” said Paul Ginsburg, a professor at the University of Southern California. “Higher prices from providers is the most important element in rising premiums in the past few years.”
Other research has linked rising health-care prices to mergers that have brought together large hospital systems, often combined with an array of doctors and other types of health-care providers. “Historically, health-care providers have consolidated,” said Michael Chernew, a Harvard University economist. “That increases their market power, and they increase their prices.”
Most recently, on Monday, two big nonprofit Texas hospital operators announced plans to combine, a move that would create a giant with 68 hospitals spanning from the Gulf of Mexico to the Oklahoma border.
A recent study by researchers including Zack Cooper, an assistant professor at Yale University, suggested that prices increased over 6% after close-by hospitals merged. A separate study published in April in the Journal of Health Economics found that doctors’ prices rose on average 14.1% after they became part of hospital systems.
The American Hospital Association said that hospitals have experienced slow price growth in recent years. The trade group also pointed to an industry-funded analysis that showed hospital mergers “can lead to substantial savings and provide needed funds to finance innovations that will enhance quality and convenience.”
Created with Highcharts 6.0.4 Faster Rise The cost of employer family health coverage has increased faster than inflation or workers’ wages. Percentage change from previous year Source: Kaiser Family Foundation
Created with Highcharts 6.0.4 % Overall inflation Workers’ earnings Family premiums 2000 ’05 ’10 ’15 -5 0 5 10 15
“Hospitals and health systems are trimming spending while improving patient outcomes. All other health care stakeholders need to do the same,” said Tom Nickels, an AHA executive vice president.
Leaders at the two Texas systems that plan to merge have said their deal aims to improve efficiency and bolster the quality of care.
The Kaiser survey was conducted between January and July of this year and included 2,160 randomly selected employers that responded to the full telephone survey.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
Appeared in the October 4, 2018, print edition as ‘Health Coverage Costs Firms $20,000 a Family.’
