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The Rising Cost Of Employee Health Care Coverage

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Health insurance premiums for the 157 million Americans who get their coverage through work rose again this year, continuing a decades-long trend that’s seen costs grow much faster than wages. A Kaiser Family Foundation survey found the amount employees pay for family coverage grew 40% just in the past decade, while wages grew only 19%. And deductibles – the amount we pay before insurance kicks in – have grown a whopping 111% over the same time period. So increases in out-of-pocket costs are squeezing even those with good benefits.

The impact of cost increases is harder on those earning less. Employees in firms with a large percentage of low wage workers — who Kaiser defines as earning $26,000 a year or less — pay almost $100 more for coverage for a single person, and almost $1,800 a year more for family coverage than those in higher-wage companies. Deductibles also tend to be higher. And the plans offered by these firms are frequently less generous than those offered to companies with more high wage workers.

But employers are paying more too. “The cost of health insurance premiums is going up,” says Kaiser Family Foundation Associate Director, Matthew Rae, “and that burden is being shared by workers and employees.” Their share of the premium for a family of four—which this year totaled $21,342--- has grown 61% over the last ten years.

Employers aren’t abandoning medical coverage for their employees, however. Ninety percent of firms have continued to offer a health benefit every year for the past decade. But they are passing on more costs to employees in the form of higher deductibles and copays, and a small percentage have eliminated some hospitals from their networks or are offering a narrower network to cut costs.

The survey was conducted from January through July, so it doesn’t reflect the full impact of the pandemic on costs. Matthew Rae says the economic crisis could affect how much employers may be willing to pay for in the future. But a study from the advisory firm Willis Towers Watson says that so many people are deferring routine medical care because of COVID-19, that it's actually driving down the cost of some medical services. It anticipates this could slow or reverse the increase in benefit costs in the coming year.

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