Workers paying more for health insurance, but getting fewer benefits

1/8/2015

By Noam N. Levey

The Affordable Care Act requires insurers to curtail administrative costs and provides new incentives to hospitals to improve quality and efficiency. Above, the HealthCare.gov website.

Although the Affordable Care Act has not led to soaring insurance costs, as many critics claimed it would, the law hasn't provided much relief to American workers either, according to a new study of employer-provided health benefits.

Workers continue to be squeezed by rising insurance costs, eroding benefits and stagnant wages, the report from the nonprofit Commonwealth Fund found.

Nationwide, the average contribution an employee made to an insurance premium in 2013 and the average deductible together represented 9.6% of the median income of American households with members under age 65.

That is up from 8.4% in 2010 and nearly double the 5.3% that households were paying for employer-provided health coverage in 2003.

"Workers are paying more but getting less protective benefits," the report's authors noted. "Although the Affordable Care Act offers a platform from which to build, securing a more affordable future will likely require action beyond those reforms, focusing on costs of care, particularly for the privately insured."

Insurance offered by employers is the primary source of health coverage in America, providing benefits to about 150 million people.

Although attention has been focused on new insurance marketplaces created by the health law to serve people without employer coverage, the law was also designed to preserve the employer system.

Supporters of the law hoped it would also modulate skyrocketing costs, which had dramatically pushed up premiums and cost-sharing through the 2000s.

The new Commonwealth report, which parallels other recent studies, indicates that healthcare insurance cost growth has slowed in recent years.

The overall price of an employer-provided family health plan, which includes the share paid by employers and the share paid by employees, increased 6% annually on average from 2003 to 2010, according to the report.

By contrast, annual growth from 2010 to 2013 averaged only 4.9%.

The employees' share of premiums also grew more slowly after 2010, increasing on average by 5.9% annually compared with 7.2% a year from 2003 to 2010.

Commonwealth Fund President David Blumenthal, who previously worked in the Obama administration, noted the health law may have contributed in part to the slowdown.

The law requires insurers to curtail administrative costs and provides new incentives to hospitals to improve quality and efficiency.

But experts give more credit for the smaller cost increases to the economic slowdown, which cut demand for health services, and increasingly aggressive efforts by employers to shift costs onto workers through higher deductibles and co-pays.

"There are a lot of things going on," said Paul Fronstin, senior research associate at the Employee Benefit Research Institute, which tracks employer coverage.

The Commonwealth Fund report found the burden of healthcare costs on employees was particularly pronounced in lower-income states.

The combined average employee premium and deductible exceeded 10% of the median working-age household income in 17 states in 2013, according to the study. In Texas and Florida, the total was more than 12%.

In California, the premium and deductible represented 9.7% of the median household income, up from 5.3% in 2003.

The lowest burden on employees was in Hawaii, a state that has historically had relatively low insurance costs and high rates of coverage. The combined cost of an employer-provided plan was 6% of median household income.

But the employee's share of healthcare costs grew in every state over the last decade.

"All states have lost ground from an employee perspective," said Cathy Schoen, one of the report's authors.

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