State Trends in the Cost of Employer Health Insurance Coverage, 2003–2013
by Cathy Schoen, David Radley, and Sara R. Collins, Commonwealth Fund, January, 2015 (excerpts)
OVERVIEW: For workers and their family members who are insured through employers, annual premium increases have far exceeded wage growth for more than a decade—with premiums rising three times faster than wages.1 In every state in the country, from 2003 to 2013, the total costs of insurance premiums rose far faster than median household income. This issue brief follows a companion paper from The Commonwealth Fund that looked at national trends in employer-sponsored insurance over the same time period.2
In state after state, this analysis finds that out-of-pocket costs for health care premiums and cost-sharing are up. The annual cost of workers’ contributions to premiums has nearly doubled nationally and is up as much as 175 percent. Per-person deductibles have more than doubled in all but six states and the District of Columbia over the decade.
There is cause for optimism, however. The rate of premium and deductible growth slowed markedly in 31 states and the District of Columbia from 2010 to 2013, the three years following implementation of the Affordable Care Act. This slowdown came during a time when some critics had warned that health insurance reforms might increase the costs of health insurance for people with private insurance.
The recent slowdown in premium growth reflects a reduction in spending on health care services since 2009. Since 2010, changes under way in how health care is delivered and paid for may be further slowing health care cost growth by improving the way care is delivered.
Employer Health Insurance Premiums Rose More Slowly from 2010 to 2013, but Premium Growth Outpaced Incomes
By 2013, the annual total costs of employer-sponsored family premiums averaged just over $16,000, ranging from $13,477 to $14,382 in the five states with the lowest costs (Alabama, Arkansas, Idaho, Mississippi, Hawaii) to $17,262 to $20,715 in the four highest-cost states (New Jersey, Massachusetts, New York, Alaska) and the District of Columbia (Exhibit 1, Table 1b). Family insurance premiums exceeded $15,000 in 39 states and D.C. by 2013; and $17,000 in seven states and D.C. Whether looking at premiums for single-person (i.e., employee-only) coverage or family coverage, the cost of health insurance provided through employers has risen faster than median incomes for the working-age population since 2003.
Workers Paying More for Less Protective Insurance Benefits
In an effort to reduce their own cost of providing health insurance, employers have increased the amount that workers contribute to their premiums and also to their health care, through higher deductibles and copayments. The result has been a rapid increase in employees’ out-of-pocket costs for premiums for plans that provide less financial protection.
In 2013, employees contributed an average 21 percent of the total premium for single-person coverage, up from 17 percent in 2003 (Table 4a). In addition, the total premium cost has increased, resulting in a 93 percent increase in the annual costs to employees for their share of health insurance premiums.
In 2003, employees’ premium contributions averaged $606 a year for a single-person plan; by 2013 this had risen to $1,170 (Exhibit 4, Table 4a). This amount ranged from an average of $751 in Hawaii, Washington, Oregon, Montana, and Arkansas to an average of $1,480 in the five states with the highest annual employee premium costs (Florida, New Hampshire, Delaware, Connecticut, Massachusetts). In 15 states, the annual costs to employees for their share of premiums rose by 100 percent or more from 2003 to 2013. Costs in Nevada, for instance, were up 175 percent.
Deductibles have grown both in proliferation and size.3 In 2013, 81 percent of workers were enrolled in a health plan with a deductible, compared with half (52 percent) in 2003. The spread of deductibles to more employees occurred across all states (Exhibit 5, Table 5).
At the same time, the average per-person deductible for employer health plans more than doubled, increasing by 146 percent from 2003 to 2013. In all but six states (Hawaii, Arkansas, Alabama, Mississippi, Wyoming, Louisiana) and the District of Columbia, deductibles doubled or more over the decade; they increased by more than 200 percent in nine states (Table 5).
High deductibles are the becoming the norm.4 In 2003, no state had an average deductible of $1,000 or more. By 2010, deductibles averaged at least $1,000 in 29 states. By 2013, average per-person deductibles exceeded $1,000 in all but three states and the District of Columbia and were over $1,500 in seven states (Texas, Connecticut, South Dakota, New Hampshire, Montana, Vermont, Maine) (Exhibit 6).
Out-of-Pocket Costs for Premiums and Deductibles Rise as Share of Income
Out-of-pocket costs for insurance and cost-sharing—including workers’ premium contributions and deductibles—are accounting for higher percentages of incomes in all states compared with 2003 (Exhibit 7, Table 7). Nationally, out-of pocket costs rose from 5.3 percent of median household income in 2003 to 9.6 percent in 2013. By 2013, the combined costs as a share of income ranged from about 6 percent to 7 percent in North Dakota, Hawaii and the District of Columbia, to 12 percent or more in Texas and Florida.
Although the rate of increase has slowed in most states since 2010, the combination of higher premium shares and higher deductibles contribute to widespread public concerns about rising health care costs. For many workers and their families, the slowdown has not made a difference in their wallets. Indeed, for many people with employer health benefits, out-of-pocket cost burdens are consuming a greater share of income.
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