Average Contributions
Most employees contribute toward their insurance costs. On average, covered workers contribute 17% of the premium for single coverage and 28% of the premium for family coverage. These numbers are similar to those reported by KFF in its annual survey during 2021.
Small vs. Large: At smaller firms, the average employee contribution for workers at small firms is $7,556, which is more than a third higher than the average for workers at large firms ($5,580). Those employed by private, for-profit firms contribute a higher percentage of the premium as compared to those at public firms, regardless of coverage type.
Forecasts for 2023
While not all analysts are forecasting the same increase in costs for 2023, most are anticipating higher costs. A survey of medical insurers by Willis Towers Watson (WTW) released in October 2022 forecast a 10% global increase, driven primarily by inflation and increased health care usage.
Rates in North America are expected to increase by 6.4% in 2023, according to WTW. Of more than 250 insurers included in the survey, more than three quarters (78%) are expecting higher or significantly higher increases in costs through 2025.
The National Business Group on Health, a trade organization devoted to health policy issues for larger employers, made a similar forecast for 2023. The group’s survey found large employers expect a 6.5% increase on average for 2023. That follows an 8.2% increase in 2021 during the height of the COVID-10 pandemic.
Mercer says employers expect health benefits costs to rise 5.4% in 2023 – with even faster growth anticipated in 2024. Aon’s analysis in 2022 forecast a 6.5% increase for employer health costs.
Out-of-Pocket Costs Increases
Whether the employer is paying all or a portion of the premium for health insurance coverage, employees almost always have out-of-pocket costs for their health care that they alone pay. If an employee has a $2,000 annual deductible, that amount must be paid before the plan begins to pay for health care services. There may also be coinsurance or copays for some services.
In 2022, the Employee Benefit Research Institute (ERBI) reported that out-of-pocket costs have increased. They were 17.4% in 2013, increasing to 19% by 2019. Although they declined in 2020 to 16.4%, that is attributed to COVID-19 and a decline in care sought by patients that year. According to the ERBI, “there is a clear upward trajectory in the share of medical expenditures borne by patients.” Paired with an increase in employees’ premiums in recent years, “this may have deleterious impact on workers’ personal finances.”
Addressing Cost Increases
Many factors influence health care costs: inflation, disease prevalence or incidence, medical technology, blockbuster and specialty drugs, care utilization, and catastrophic claims. Employers face a delicate balancing act managing increasing costs and making smart decisions about the best ways to attract and retain workers.
You can aid your clients by helping them understand the pros and cons of different plan types. For example, High Deductible Health Plans (HDHPs) have grown significantly in popularity. According to ValuePenguin, a record number of American private-sector workers were enrolled in HDHPs in 2021.
Enrollment is up more than 20% from 2021 to 2021. However, HDHPs are not for every employer or employee.
In fact, Preferred Provider Organization (PPO) plans remain the most common plan type. Nearly half (49%) of employees enrolled in a PPO in 2022. Twelve percent enrolled in an HMO, nine percent in a Point-Of-Service (POS) plan, and one percent in a conventional (indemnity) plan.