Health Plan Deductibles Grew Seven Times Faster Than Wages

The Kaiser Family Foundation just released its 2015 Employer Benefits Survey:

Single and family premiums for employer-sponsored health insurance rose an average of 4 percent this year, continuing a decade-long period of moderate growth, according to the Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2015 Employer Health Benefits Survey released today. Since 2005, premiums have grown an average of 5 percent each year, compared to 11 percent annually between 1999 and 2005.

The average annual premium for single coverage is $6,251, of which workers on average pay $1,071. The average family premium is $17,545, with workers on average contributing $4,955.

Since 2010, both the share of workers with deductibles and the size of those deductibles have increased sharply. These two trends together result in a 67 percent increase in deductibles since 2010, much faster than the rise in single premiums (24%) and about seven times the rise in workers’ wages (10%) and general inflation (9%).

“With deductibles rising so much faster than premiums and wages, it’s no surprise that consumers have not felt the slowdown in health spending,” Foundation President and CEO Drew Altman said.

I would state that a little differently: It is consumers who are causing some of the slowdown, because they are increasingly sensitive to health spending. So, the movement to faster growing deductibles and slower growing premiums as a good thing. However, I have to qualify that remark: There is still too much price-fixing conducted between health insurers and providers, and not enough price formation by consumers and providers directly.

I would also quibble with the way the lead author describes the effect of the Cadillac tax, a punitive excise tax Obamacare will begin to levy on employers with health plans valued above a threshold in 2018:

“Our survey finds most large employers are already planning for the Cadillac tax, with some already taking steps to minimize its impact in 2018,” said study lead author Gary Claxton, a Foundation vice president and director of the Health Care Marketplace Project. “Those changes likely will shift costs to workers, but exactly how and how much will vary for individual workers.”

Like premiums, the Cadillac tax will be entirely borne by workers. Whether it is passed on as a hike in premium or a reduction in wage growth is a secondary matter.

The Employer Benefits Survey, which the KFF has sponsored for many years, continues to be an important and excellent resource. The whole survey is worth reading.

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For the pivotal alternative to Obamacare, see A Better Choice: Healthcare Solutions for America, by John C. Goodman (Independent Institute, 2015).