The price of health insurance provided by employers for families jumped 9% this year over 2010 as rising healthcare expenses contributed to the largest premium increases in six years, a national survey shows.
Annual insurance premiums for families rose to $15,073 on average in 2011, up from an average of $13,770 last year and more than twice the cost of a decade ago, according to the Kaiser Family Foundation and the Health Research & Educational Trust.
Employers picked up most of the cost, but workers continued to struggle to keep up with the growth in their share, which has far outpaced any growth in their earnings. Some experts predict the increases will slow next year.
“A big premium jump is especially tough for workers and employers when they’re facing a faltering recovery, but it’s really tough for workers when wages are declining in real terms,” said Drew Altman, president of the Kaiser foundation. “The pain factor is pretty high right now.”
Richard Ledford knows the pain all too well. The San Diego businessman, who provides insurance for himself, his wife and two employees, watched his premiums climb 12% this year.
The $2,500 he now spends for coverage every month is the largest single expense at his lobbying firm, exceeding even the $1,600 he pays for office space.
“It certainly creates obstacles for businesses trying to do the right thing for their employees,” Ledford said. “It comes right out of my bottom line.”
Insurance offered by employers is the leading source of health coverage in the United States, providing benefits to about 150 million people.
Rising costs have become a major point of contention in some work settings, where employers and workers clash over how to split the costs.
The issue nearly triggered a mass strike by Southern California grocery workers recently and was settled only after unionized employees and major supermarket chains agreed to both share more of the pain.
Insurance industry leaders blame the rising premiums on an aging and sicker insurance pool and on the escalating costs for medical care, pharmaceuticals and other healthcare expenses. Insurers say new mandates in the federal healthcare overhaul are also a factor in making insurance more expensive.
They point, for example, to provisions that require them to pay more of the cost of doctor visits and that allow adult children to remain on their parents’ insurance policies until age 26.
“Policymakers in Washington and the states need to focus on all of the factors that are driving premium increases,” said Karen Ignagni, president of America’s Health Insurance Plans, the industry’s trade group. “Reducing healthcare cost growth will make it easier for consumers and employers to afford coverage.”
Some experts predict that health expenses for U.S. employers will slow next year.
Firms are forecasting a 5.4% increase on average in 2012, according to preliminary results from a survey of nearly 1,600 employers by benefits consulting firm Mercer. The figure reflects expected cost-cutting measures by employers, as many switch to health plans with lesser benefits.
This year, companies paid $10,944 on average to cover workers and their families, according to the Kaiser survey of 3,184 public and private employers. Employees paid $4,129.
Workers’ insurance bills far outpaced their earnings. Employee contributions to health benefits have grown 168% since 1999, more than three times the rate of earnings growth and more than four times the rate of overall inflation, the survey found.
To cut costs, companies and workers are increasingly turning to high-deductible policies that require workers to pay more out of their pockets for medical care. The largest growth of these plans has been among companies with three to 199 employees.
Fifty percent of workers at these firms have the high-deductible plans this year, up from 16% in 2006, the Kaiser survey found.
Torrence’s Farm Implements, a farm equipment dealer on California’s southern border, switched to a high-deductible plan for employees in 2003 to counter rising costs.
The company, about 120 miles east of San Diego in Imperial County, now uses a hybrid approach: Employees pick up the initial $500 in deductible costs and the firm pays the remaining $4,500.
So far, only about 10% of the 40 employees have used their entire deductible. The plan has shaved the company’s insurance bill by about one-third.
“It’s clearly saved us a lot of money,” said officer manager Kimberly Hester-Wake. “It’s reduced the expense.”