SAN FRANCISCO (KCBS RADIO) – This year, family premiums for employer-sponsored health insurance rose 7%, according to research released Wednesday by the Kaiser Family Foundation. That’s the second year in a row with a 7% spike.
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Now, the costs have reached an average of $25,572 annually for families and have increased 6% to $8,951 for single coverage said KFF’s 2024 benchmark Employer Health Survey. Workers contribute $6,296 annually to the cost of family coverage and $1,368 for single coverage.
“Employers are shelling out the equivalent of buying an economy car for every worker every year to pay for family coverage,” KFF President and CEO Drew Altman said. “In the tight labor market in recent years, they have not been able to continue offloading costs onto workers who are already struggling with health care bills.”
According to USA Today, “health insurance costs rose at higher rates than the 4.5% increase in workers' wages and the 3.2% jump in inflation, which cooled after spiking in 2021 and 2022.”
Around 154 million non-elderly Americans rely on employer-sponsored coverage, according to the annual survey. More than 2,100 large and small employers were included to provide a detailed picture of the health insurance trends.
It found that costs for workers haven’t increased as costs for employers, potentially due to that tight labor market. Still, even employer spending can have an impact on labor.
“The harm from high medical spending goes well beyond the medical sector,” said a 2020 article from Harvard professor David Cutler. “Many firms have outsourced low-wage workers because providing them health benefits is too expensive.”
KFF’s study – it’s 26th annual benchmark employer health survey – found that workers who face an annual deductible for single coverage had an average this year of around $1,787, similar to last year’s $1,735 and up 8% since 2019 when the average was $1,655. Workers with a deductible at small firms (under 200 workers) face much larger deductibles than workers at larger firms ($2,575 vs. $1,538).
“The survey finds that some of the nation’s largest employers (at least 5,000 workers) are taking steps to shield lower-wage workers from the full impact of rising health care costs,” said KFF. “Of these jumbo firms, 29% say they have a program to reduce lower-wage workers’ premiums, and 19% say they offer a reduced-benefit plan with more affordable coverage.”
Earlier this year, KFF said that its polling has found that the high cost of health care has been a burden on U.S. families for many years. It added that recent polling shows that lowering out-of-pocket health care costs is by and large the public’s top health care priority.
As of this March, about half of U.S. adults say it is difficult to afford health care costs. One in four said they or a family member in their household had problems paying for health care in the past 12 months.
So, why are prices so high? KFF said that healthcare costs have increased alongside inflation and wages for the past five years, but research about health outcomes has shown that America spends more on healthcare than it gets out of it.
Per the Peter G. Peterson Foundation, the cost of healthcare services has typically grown faster than the cost of other goods and services in the economy over the past two decades. New healthcare technology, a complex healthcare system and consolidation of hospitals have all contributed to rising costs.
Harvard’s Cutler did a deep dive into some of the price drivers in his article. He said about one third of the $3.5 trillion spent on healthcare per year in the U.S. is actually wasted.
“The sources of that waste, in terms of health value received for dollars spent, may surprise you. It has certainly proven resistant to political repair,” Cutler said. “Given the relatively poor results Americans receive for all they spend, fixing health care matters: for citizens’ well-being, the country’s fiscal soundness, and extending essential medical services to those who lack access now.”
He also argued that the U.S. does not “guarantee adequate access to medical care because we cannot figure out how to pay for it,” and quoted billionaire Warren Buffet’s comment that medical costs act like a “tapeworm on American economic competitiveness.”
According to Cutler, pharmaceutical company profit margins, insurance executive salaries, prioritizing expensive procedures and tests over consistent care and the costs of healthcare administration contribute to high healthcare costs. Of all of these, he said the largest component is the cost of healthcare administration.
“About one-third of healthcare dollars spent in the United States pays for administration; Canada spends a fraction as much,” Cutler explained. “Whole occupations exist in U.S. medical care that are found nowhere else in the world, from medical-record coding to claim-submission specialists.”
Those costs could be cut down throughout standardization, he said.
“Grocery-store checkout is simple because all products have bar codes and credit-card machines are uniform. Mobile banking is easy because the Federal Reserve has put standards in place for how banks interface with each other,” said Cutler. “But every health insurer requires a different bar-code-equivalent and payment-systems submission.”
This standardization could be achieved by the federal government forcing payers and providers to adopt billing and interface rules, he added.
Regarding the results of KFF’s recent survey, Matthew Rae, associate director of KFF’s health care marketplace project, said accelerating rates could reflect the growth of prices overall in the economy. He also said “people also are accessing health care more frequently after skimping on doctor visits and routine medical screenings during the COVID-19 pandemic,” per USA Today.
Employees should expect to see the higher prices in coming weeks when employers roll out their 2025 plans, USA Today said. After an extended period of pinching pennies for many due to inflation, this means yet another increased cost will be cutting into their paycheck.
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