Health Premium Growth Moderating as Employees Pay Larger Share

By Stephen Miller, CEBS Jun 27, 2013

Group health plan premiums are rising at a more moderate rate for large U.S. companies, according to benchmarks reported by the ADP Research Institute, an affiliate of benefits provider ADP.

In 2013 the average monthly group health plan premium was $832, up 13.9 percent from 2010. However, after a 7.6 percent jump from 2010 to 2011, the rate of increase moderated, rising 3.1 percent from 2012 to 2013, the ADP Annual Health Benefits Report found.

The moderating of premium costs may have been due in part to an increasing number of employers reducing coverage value and shifting to high-deductible health plans with higher co-pays, including consumer-directed health plans linked to health savings accounts or health reimbursement arrangements, according to the report.

The study used employer data spanning 2010 to 2013, focusing on benefits provided to nonunion, full-time employees. The research considered the same set of companies each year in order to provide consistent comparisons. All companies had 1,000 or more employees for at least one of the four years and no fewer than 800 in any given year.

Employer Premium Contributions

The average monthly contribution companies made to plan premiums in 2013 was $627, with an employee contribution of $205. The share that employers contributed to plan premiums declined slightly across most age groups from 2010 to 2013. The exception was for workers under 40, for whom companies slightly increased contributions to their premiums. "The increase may be linked to the practice of increasing subsidies for single coverage (zero dependents)," the report said.

Along those lines, the more dependents employees had, the greater the drop in employers' contribution share to health plan premiums. Since 2010, the largest percentage decrease in companies' contribution (down 0.9 percent) was for workers with four or more dependents. Those with no dependents saw an increase in their employer’s contribution (up 0.6 percent). "These findings may be linked to a general employer trend toward smaller subsidies for family coverage as compared to individual coverage," the report said.

Costs by State

The cost of health plan premiums, as well as premium increases, varied widely by state. In 2013, of the 21 states analyzed, New Jersey had the highest monthly group health premium at $968, while North Carolina had the lowest at $733. This year the employers’ contribution share of health plan premiums ranged from 79 percent in New York to 72 percent in Colorado.

Premiums by Age

Health plan premiums have risen for employees of all ages since 2010, the report found. In 2013:

  • The largest monthly premiumwas for those ages 40-49 ($949).
  • The largest percentage premium increase since 2010 was among those under age 30 (16.3 percent).
  • The smallest percentage premiumincrease since 2010 was among those ages 30-39 (10.5 percent).

Premiums as a Percentage of Income

Premiums as a percentage of income increased across all income levels. Since 2010, the largest percentage change was among those with incomes between $15,000 and $20,000. Those with higher incomes generally saw smaller percentage changes:

  • Employees earning from $15,000 to $20,000used 8.4 percent of their income for health plan premiums in 2013, up 0.9 percent from 2010.
  • Those earning from $60,000 to $65,000 contributed 4.1 percent of their income to premiums, up 0.4 percent from 2010.
  • Workers earning from $115,0000 to $120,000put 2.6 percent of their income toward premiums, up 0.3 percent from 2010.

"Because health plan premiums grew more quickly than wages, premium contributions, as a percentage of income, increased more rapidly for lower-wage employees," the report explained.

Post-Reform Health Strategy

The report's findings "suggests that younger generations and lower wage workers are facing the greatest health care challenges in terms of eligibility and cost, and these are employees that employers will need to carefully consider when designing and communicating their 2014 benefits programs," Tim Clifford, president of ADP Benefits Administration Services, told SHRM Online.

"In an effort to reduce the risk in their pool of covered workers and potentially reduce costs for the total covered population, employers may choose to extend coverage to employees who were not previously eligible," Clifford noted. "They may also opt to change the contribution tiers of coverage, adjust part-time/full-time hiring strategies or adjust their contribution to the coverage of dependents. All of these strategies could have far-reaching effects on U.S. businesses, employee compensation and the overall economy."

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

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