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Clone of family health plan premiums near $16,000

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Annual premiums for employer-sponsored family health coverage reached $15,745 in 2012, up 4% from 2011, with workers on average paying $4,316 toward the cost of their coverage, according to the not-for profit Kaiser Family Foundation (KFF) and Health Research & Educational Trust (HRET)'s 2012 Employer Health Benefits Survey report.

Premiums for worker-only health coverage increased 3% in 2012 to reach $5,615 annually. Workers on average pay $951 toward this coverage.

The 2012 premium increase was moderate by historical standards but outpaced the growth in workers’ wages (1.7%) and general inflation (2.3%). Since 2002, premiums have increased 97%, three times as fast as wages (33%) and inflation (28%), according to the annual survey.

“In terms of employee insurance costs, this year’s 4% increase [for family coverage] qualifies as a good year, but it still takes a growing bite out of middle-class workers’ wages, which have been flat or falling in real terms,” Kaiser president and CEO Drew Altman said during a conference call with the media. (Altman also authored a commentary on the survey results.)

Cost expectations for 2013

In addition to the comprehensive survey conducted in the spring of 2012, employers were asked in August 2012 whether they had information about plan year 2013 cost increases for their current health plan with the largest enrollment. The average increase reported by employers who had received information for their current plan was 7%.

These early reports may not match what employers and workers ultimately end up paying in 2013, as firms can raise deductibles or otherwise change the health benefits they offer to lower premiums. In 2012, for example, more than half (54%) of employers who offered health benefits reported they had shopped around for new coverage. Of that group, a significant portion switched carriers (18%) or changed the type of plans they offer (27%).

Employers also must decide whether the portion of cost increases directed to family coverage premiums will be greater than the portion borne by those with individual-only coverage.

High-wage vs. low-wage firms

The KFF/HRET survey revealed significant differences in 2012 regarding worker contributions toward family premiums between firms with many lower-wage workers (at least 35% of their workers earn $24,000 or less a year) and firms with many higher-wage workers (at least 35% of their workers earn $55,000 or more a year):

Workers at lower-wage firms on average pay $1,000 more each year out of their paychecks for family coverage than workers at higher-wage firms ($4,977 and $3,968, respectively). This occurs even though the average total premiums cost (employer plus employee paid) for family coverage at firms with many lower-wage workers is lower (for instance, due to less comprehensive coverage) than at firms with many higher-wage workers ($14,694 and $16,427, respectively).

Workers at lower-wage firms are more likely to face high deductibles than those at higher-wage firms. Specifically, 44% of covered workers at firms with many lower-wage workers face an annual deductible of $1,000 or more, compared with 29% of those at firms with many higher-wage workers. Across all employers, one-third of covered workers (34%) face a deductible of that size, including 14% with deductibles of at least $2,000 annually. 

Healthcare reform and employers

The KFF/HRET survey estimated that 2.9 million young adults were covered by employer plans in 2012 as a result of a provision in the 2010 Patient Protection and Affordable Care Act that allows young adults up to age 26 without employer coverage of their own to be covered as dependents on their parents’ plan. That’s up from the 2.3 million in the 2011 survey.

The survey also found that 48% of covered workers were in “grandfathered” plans as defined under health care reform, down from 56% in 2011. Grandfathered plans are exempted from some health care reform requirements, including covering preventive benefits with no cost-sharing and having an external appeals process. To retain this status, employers must not make significant changes to their plans to reduce benefits or increase employee costs.

Cost-sharing

Average co-payments in 2012, according to the KFF/HRET survey, include the following:

For in-network physician office visits, covered workers' average co-pays were $23 for primary care and $33 for specialty care.

For emergency room visits, average co-pays were $118.

For drug plans with three or more tiers, average co-pays were $10 for generic drugs, $29 for preferred brand-name drugs, $51 for nonpreferred brand-name drugs and $79 for specialty drugs.

Part-time workers

Among firms offering health benefits:

28% provided coverage to part-time workers in 2012, up from the 16% reported in 2011 but similar to the 25% reported in 2010.

Large firms -- those with 200 or more workers -- were more likely than smaller companies to offer health benefits to part-time employees (45% versus 28%). In 2010, only 39% of large firms offered health insurance to part-time workers.

Under the Patient Protection and Affordable Care Act, employees working 30 or more hours per week will be considered full time and must be offered employer-based health coverage. Businesses with 50 or more employees that don't offer coverage will have to pay a $2,000-per-worker penalty.

Other findings

The survey also revealed findings related to:

Domestic partner benefits. In 2012, 31% of employers offered health benefits to same-sex domestic partners, up from 21% three years earlier. In 2012, 37% of firms offered such benefits to unmarried opposite-sex partners, up from 31% in 2009.

Flexible spending accounts (FSAs) and pretax premiums. Large employers were more likely than smaller ones (those with under 200 workers) to allow workers to pay their share of premiums with pretax income (91% for large employers vs. 41% for small employers) and to contribute pretax dollars to FSAs (76% vs. 17%).

The KFF/HRET survey was conducted between January and May of 2012 and included 3,326 randomly selected, nonfederal public and private firms with three or more employees (2,121 of which responded to the full survey and 1,205 of which responded to a single question about offering coverage).

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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