Over the past 10 years, health insurance costs have increased steadily. The big question is how these changes affect American workers and what that means for health insurance options. Recently, the Kaiser Family Foundation (KFF) released their annual Employer Health Benefits Survey, offering insight into the effect of rising healthcare costs on employers and employees alike.
Current Trends in Health Insurance Cost
According to the 2016 KFF Employer Health Benefits Survey, the average employer-provided premium in 2016 for single coverage is $536 per month, or $6,435 per year. The average premium for family coverage is $1,512 per month or $18,142 per year.
For employees, the financial responsibility has increased at a much faster rate than employers -- 78 percent since 2006, from $2,973 to $5,277 on average.
Increasing premiums is only part of the story.
The report highlights the popular trend of employers switching to high deductible health plans (HDHPs), which are generally associated with lower premiums. In 2016, 29 percent of workers are enrolled in a HDHP -- up from just 4 percent in 2006.
In addition, the percentage of small firms (10-49 people) that offer employer-provided health insurance is decreasing. This trend was first detected in the early 2000’s (with a short-lived spike in 2010), indicating that this decrease is not necessarily in response to the Affordable Care Act (ACA).
What This Means for Employees
The upside to HDHPs is they allow you to set up a health savings account (HSA), to which the employer or employee can deposit tax-free dollars in a real savings account. HSAs do not come with a “use it or lose it” clause, as with flexible spending accounts (FSAs), which means the money accumulates until it is used for qualified medical expenses.
HSAs can be an excellent way to manage your overall health insurance costs, while also planning for retirement. Because the money never “expires,” you can save money now for expenses that you may incur post-retirement, when your financial situation may be a bit more rigid. The HSA can pay for prescriptions, copays, hospitals visits, and more so that your income is not gouged by unforeseen events.
Ways to Control Your Health Insurance Costs
If the statistics in this report are alarming to you, be sure to educate yourself on alternative options. Many people are unaware you can set up defined contribution health plans (DCHPs) in the form of health reimbursement arrangements (HRAs) or healthcare reimbursement plans (HRPs).
These types of benefits allow you, the employer, to designate a specific, tax-free amount for each of your employees per month. Employees can use this money to help pay for health insurance premiums associated with plans that they purchased on their own, whether through private insurers or the ACA Exchanges.
As health insurance costs continue to rise, it is important for employers to find a balance between controlling expenses and shifting an overwhelming financial burden to their workers. DCHPs are an excellent way to do so, while still providing a meaningful benefits package.
How are you controlling your health insurance costs? Let us know in the comments below!