Employer-Sponsored Family Health Premiums Rise a Modest 4 Percent in 2013, National Benchmark Employer Survey Finds

Annual Family Premiums Now Top $16,000 On Average, With Workers Paying Nearly $4,600

Menlo Park, Calif. – Annual premiums for employer-sponsored family health coverage reached $16,351 this year, up 4 percent from last year, with workers on average paying $4,565 toward the cost of their coverage, according to the Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2013 Employer Health Benefits Survey released today. During the same period, workers’ wages and general inflation were up 1.8 percent and 1.1 percent respectively.

This year’s rise in premiums remains moderate by historical standards. Since 2003, premiums have increased 80 percent, nearly three times as fast as wages (31 percent) and inflation (27 percent).

“We are in a prolonged period of moderation in premiums, which should create some breathing room for the private sector to try to reduce costs without cutting back benefits for workers,” Kaiser President and CEO Drew Altman, Ph.D., said.

“Ensuring that workers have access to affordable coverage is important for our health care system and slower premium growth is supporting that,” said Maulik Joshi, Dr.P.H., president of HRET and senior vice president for research at the American Hospital Association. “Wellness programs are an exciting component of this process with employers offering resources to employees that help improve their overall health – our ultimate goal.”

The 15th annual Kaiser/HRET survey of more than 2,000 small and large employers provides a detailed picture of the status and trends in employer-sponsored health insurance costs and coverage. In addition to the full report and summary of findings being released today, the journal Health Affairs is publishing a Web First article with select findings.

The survey shows that firms with many lower-wage workers (at least 35 percent earning $23,000 or less annually) require workers to pay $1,363 more on average toward family premiums than workers at firms with fewer lower-wage workers ($5,818 vs. $4,455 annually). The lower-wage firms on average offer less costly coverage too, creating a large disparity in the share of the premium that their workers pay (39 percent vs. 29 percent).

This year, 78 percent of all covered workers face a general annual deductible, up from 72 percent in 2012. Workers typically must pay this deductible before most services are covered by their health plan. The average deductible this year for worker-only coverage is $1,135, similar to the $1,097 average deductible in 2012.

The survey also finds that large deductibles of at least $1,000 or more are common in employer-sponsored plans, especially among workers of smaller firms. This year, 38 percent of all covered workers face such a deductible. At small firms, 58 percent of covered workers now face deductibles of at least $1,000, including nearly a third (31 percent) who face deductibles of at least $2,000, up from 12 percent in 2008.

Wellness Programs and Financial Incentives

Employee wellness programs are a popular strategy for employers trying to control costs. In 2013, 35 percent of employers say they are a very effective strategy for controlling costs, a larger share than says the same about any other strategy, including disease management (22 percent), consumer-driven health plans (20 percent) or higher cost sharing (17 percent).

Nearly all large employers (at least 200 workers) offer at least one wellness program, which can take many forms and target a wide range of conditions. More than a third (36 percent) of large employers who offer wellness programs offer some kind of financial incentive for workers to participate, such as lower premiums or a lower deductible, receiving a larger contribution to a tax-preferred savings account, or gift cards, cash or other direct financial incentives.

Among large firms offering health benefits, more than half (55 percent) offer some kind of biometric screenings to measure workers’ health risks. Of these, 11 percent reward or penalize workers financially based on whether they achieve specific biometric outcomes.

Implications for the Affordable Care Act

The Affordable Care Act (ACA) includes provisions that allow broader use of financial incentives to encourage workers to improve their health status and outcomes.

“This will be an important issue to watch next year, as employers will have more flexibility and could ask workers to pay more because of their lifestyles and health conditions,” said Kaiser Vice President Gary Claxton, the study’s lead investigator and director of the Foundation’s Health Care Marketplace Project.

The survey also finds that 36 percent of covered workers are in “grandfathered” plans as defined by the ACA, down from 48 percent last year. The shift means a rising share of workers will benefit from some of the health law’s reforms affecting the employer market, such as covering preventive benefits without cost sharing and offering an external appeals process. Grandfathered plans, which were in place before the law’s passage, are exempt from these provisions. Plans lose their grandfathered status if they make significant changes to reduce benefits or raise workers’ costs.

The slow growth in premiums also means that fewer employer plans are likely to be subject to the ACA’s high-cost plan tax that takes effect in 2018. The Congressional Budget Office recently reduced its estimate of the number of plans that would trigger the tax, and a continued low growth rate could further reduce the impact of this provision.

For the first time, the survey also asked large employers about their interest in private health insurance exchanges, a relatively new concept that pulls together a wide range of insurance plans which participating employers can offer to their workers to choose from. Though relatively few chose this option in 2013, 29 percent of those with at least 5,000 workers say they are considering offering benefits through a private exchange in the future. These jumbo firms employ almost 40 percent of all covered workers, so their interest could portend a significant shift in the way many people get their health insurance in the future.

Offer rates

Offer rates have remained relatively stable. This year, the survey finds 57 percent of firms offer health benefits to their workers – statistically unchanged from the 61 percent in 2012 and 60 percent in 2011. As in the past, the larger an employer is, the more likely they are to offer health benefits — with nearly all firms with at least 200 workers offering health benefits to at least some of their workers.

Since most firms in the country are small, variation in the overall offer rate is driven primarily by changes in the percentages of the smallest firms (3-9 workers) offering health benefits (45 percent in 2013, similar to the 50 percent which did so in 2012). Also, firms with many low-wage workers are significantly less likely to offer health insurance than firms with few low-wage workers (23 percent and 60 percent, respectively).

The annual survey is a joint project of the Kaiser Family Foundation and the Health Research & Educational Trust. The survey was conducted between January and May of 2013 and included 2,948 randomly selected, non-federal public and private firms with three or more employees (2,067 of which responded to the full survey and 881 of which responded to a single question about offering coverage). A research team at Kaiser, HRET and NORC at the University of Chicago, led by Kaiser’s Gary Claxton, designed, conducted and analyzed the survey. For more information on the survey methodology, please visit the Survey Design and Methods Section at https://www.kff.org/EHBS .

The Kaiser Family Foundation, a leader in health policy analysis, health journalism and communication, is dedicated to filling the need for trusted, independent information on the major health issues facing our nation and its people. The Foundation is a non-profit private operating foundation, based in Menlo Park, California.

Founded in 1944, the Health Research & Educational Trust (HRET) is a private, not-for-profit organization involved in research, education, and demonstration programs addressing health management and policy issues. An affiliate of the American Hospital Association (AHA), HRET collaborates with health care, government, academic, business, and community organizations across the United States to conduct research and disseminate findings that shape the future of health care. For more information about HRET, visit http://www.hret.org.

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and Health Policy Briefs published twice monthly at http://www.healthaffairs.org. The full text of each Health Affairs Web First paper is available free of charge to all website visitors for a one-week period following posting, after which it switches to pay-per-view for nonsubscribers. You can also find the journal on Facebook and Twitter. Read daily perspectives on Health Affairs Blog. Download our podcasts, including monthly Narrative Matters essays, on iTunes. Tap into Health Affairs content with the new iPad app.