In 2005, premiums for family coverage increased 9.2%. This is the first year of single digit increases since 2000. This is the second consecutive year that premium increases were less than they were in the previous year.1
While lower than in recent years, the 9.2% increase in the cost of coverage exceeds the overall rate of inflation by nearly 6 percentage points and the increase in workers’ earnings by over 6 percentage points. Since 2000, the cost of health insurance has increased by 73%.
The average cost of family coverage is $10,880 a year, which exceeds the annual gross earnings of a minimum wage worker who is fully employed throughout the year.2
Premium Increases
- The cost of health insurance rose 9.2% in 2005, less than the 11.2% increase in 2004, but much higher than the overall rate of inflation of 3.5% and the increase in workers’ earnings of 2.7% (Exhibit 1.1).
- Covered workers in small firms (3-199 workers) and large firms (200 or more workers) experienced similar premium increases (9.8% vs. 8.9%) (Exhibit 1.3).
- There is considerable variation in premium increases across workers and firms: 7% of covered workers work in firms that experienced premium increases of greater than 20%, while 32% of covered workers work in firms that experienced premium increases of less than or equal to 5% (Exhibit 1.4).
Monthly Premium Costs for Single and Family Coverage
- The average cost of single coverage for covered workers in 2005 is $335 per month or $4,024 per year. This figure includes both the employer and employee contribution. The average cost of family coverage is $907 per month or $10,880 per year (Exhibit 1.13).
- Covered workers in PPO plans, the plan type with the highest enrollment, face higher average premiums for both single and family coverage than covered workers in HMO plans. The average annual premium for covered workers in PPO plans is $4,150 for single coverage and $11,090 for family coverage, while the average annual premium for covered workers in HMO plans is $3,767 for single coverage and $10,456 for family coverage (Exhibit 1.13).
