Employer Sponsored 2020 Out-of-Pocket Costs Were Stable Pre-COVID

Employer-sponsored health plans grew more expensive for individuals and families in 2020, the Employer Health Benefits annual Kaiser Family Foundation (KFF) survey found.

“Conducted partly before the pandemic, our survey shows the burden of health costs on workers remains high, though not getting dramatically worse,” Drew Altman, president and chief executive officer of KFF, said in the press release. “Things may look different moving forward as employers grapple with the economic and health upheaval sparked by the pandemic.”

Average 2020 premiums for individuals are $7,470 and employees cover $1,243 of that cost. For families, average 2020 premiums are $21,342 and the families themselves pay on average around $5,588.

Single workers covered around 17 percent of their premiums and families covered on average 27 percent of their premiums.

These average premium rates represent a four percent increase in both the individual market and for families compared to the results of KFF’s 2019 survey. This continues the upward trend over the past decade. The average family premium jumped 22 percent in the past five years and 55 percent in the past ten years, the survey found.

Between 2010 and 2015, employee contributions to their healthcare premium rose 24 percent, coinciding with a 27 percent increase in the average premium. From 2015 to 2020, the employee contribution grew by 13 percent, attending a 22 percent average premium increase.

Meanwhile, as employees pay more for premiums, their wages fell by 3.4 percent and inflation escalated by 2.1 percent, the survey noted.

The researchers found that these fit into the overall pattern of the past several years, a trajectory that some experts find concerning.

“Looking at the metrics we usually consider, such as premiums, contributions, cost-sharing, offer and coverage rates, we would conclude that the marketplace for employer-based health coverage had another stable year in 2020,” the researchers wrote.

“Premium increases were modest and consistent with recent years, contributions and cost-sharing largely did not change, nor did the shares of workers offered coverage or covered at their jobs. There is a meaningful increase in the share of workers in self-funded plans, which will be important to understand if the higher level persists.”

However, the outlook could change based on the impacts of the coronavirus pandemic.

The survey highlighted a couple of factors that generally indicate premium levels, including the size of the employee’s firm and plan type.

In 2020, families may face a larger premium if the employee works for a larger firm. The average premium for a large firm is more than $1,200 higher than the average premium for a small firm. That being said, families pay a higher share of the premium in smaller firms, contributing 35 percent of the premium as opposed to 26 percent at a larger firm.

Average premium costs were largely the same across plan types, but individuals paid about $120 less than the average premium cost and families paid $736 less than the average premium in a high deductible health plan with a savings option.

The most expensive option across both families and individuals was the point-of-service plan.

Most employees were in a plan with some amount of cost-sharing, with 83 percent in a plan that had a general annual deductible for single coverage.

The average single coverage deductible amount for those with a general annual deductible was  $1,644. The average single coverage annual deductible rose by 25 percent over the past five years. It increased 79 percent over the last decade.

“Deductibles have increased in recent years due to higher deductibles within plan types and higher enrollment in HDHP/SOs,” the survey found. “While growing deductibles in PPOs and other plan types generally increase enrollee out-of-pocket liability, the shift to enrollment in HDHP/SOs does not necessarily do so if HDHP/SO enrollees receive an offsetting account contribution from their employers.”

High deductible health plan enrollment rose across all firms in the last five years. However, preferred provider organizations remain the health plan type with the largest enrollment across all plan types in both small and large firms with 47 percent of enrollment.

A small portion of those in high deductible health plans with a saving option can cover their deductibles with the saving option. A larger portion of that enrollee population can bring down their costs with the savings option.

Of those in high deductible health plans with a health reimbursement arrangement (HRA), ten percent receive an employer contribution that at least covers their deductible for single coverage and 41 percent receive enough in their HRA to decrease their out-of-pocket healthcare spending liability by $1,000.

For those in high deductible health plans with a health savings account (HSA), three percent receive enough to cover their deductible for single coverage and another 19 percent can reduce their out-of-pocket healthcare spending by $1,000 with their HSA contribution.

That does not mean, however, that employees are using their savings option to cover these costs. Other research has revealed a gap in health literacy, specifically around enrollee understanding of how to leverage health savings accounts.

Projecting for the future with certainty was a difficult task, the researchers indicated.

“The challenge for the 2021 survey will be to understand how employers are responding to the pandemic and accompanying economic fallout while still maintaining the core questions and purpose of the survey,” the survey concluded.