Health insurance rates increase 7%

The survey also reported that companies are concerned about a lack of access to mental health care for employees. About one in three larger employers thought there were not enough behavioral health providers for timely mental health appointments. Only three in five employers said there were enough options to treat substance use disorders.

Inflation that sent the cost of groceries and rent soaring is now surfacing in health insurance.

The average cost for a family health insurance plan offered through an employer jumped 7% this year to $23,968 − the highest increase in a decade, according to the annual employer health benefits survey released Wednesday by KFF, a private health foundation.

Prices are far higher than they were a year ago, when premiums increased by 1%.

Insurance costs for individuals also rose 7% to $8,435, the survey said.

"We've had this period of super high inflation and now premiums are catching up," said Matthew Rae, associate director of KFF's health care marketplace project.

That said, the insurance price increases are far less than the double-digit rate hikes that were routine during the first part of the last decade.

KFF tracks trends in employer health insurance through an annual survey of more than 2,100 companies. More than 150million Americans get health insurance through their workplace. Employers pay for the vast majority of health insurance expenses, and use those benefits to attract and keep workers.

Many are reluctant to pass significantly higher costs to workers when unemployment is low, Rae said: "If you're trying to recruit people, it's just not the time to cut benefits and pass on huge costs."

Even so, as enrollment for 2024 plans opens in the coming weeks, nearly one in four employers expects to share a portion of these higher costs with workers, who might see larger paycheck deductions at a time when inflation still outpaces wage growth.

The survey also reported that companies are concerned about a lack of access to mental health care for employees. About one in three larger employers thought there were not enough behavioral health providers for timely mental health appointments. Only three in five employers said there were enough options to treat substance use disorders.

Company size matters

Workers at smaller companies usually pay more for health insurance, according to the survey. Employees at workplaces with fewer than 200 people paid $8,334 last year for a typical family health insurance plan, nearly $2,500 more than workers at larger companies. Nearly one in four workers at small companies paid $12,000 or more for a family health plan.

The cost of health insurance is based on how much insurance plans pay for bills from hospitals, doctors, prescription drugs and other medical services. Costs soar for smaller companies even if just a handful of employees are diagnosed with cancer or other chronic conditions and require expensive prescription drugs or lengthy hospital stays.

Anson Industries, a specialty contractor headquartered in suburban Chicago, provides health insurance for nearly 300 employees and their family members. The company hasn't made employees pay more for health insurance during the past four years, even as it absorbed annual hikes of 25% and 15% the past two years, said Anne Higginson, Anson Industries' assistant risk manager.

The company is still finalizing health plan options and pricing for 2024.

Anson Industries has struggled to retain younger employees who want to work remotely. So it "most definitely" wants to maintain affordable health insurance as a benefit to recruit and keep workers, Higginson said.

Higher wages, hospital mergers

Though inflation is starting to go down, health insurance rates are still rising. That's because insurance prices are set before people actually get health care. If unexpected costs arise from more claims or higher labor costs, insurance companies raise premiums the following year.

A survey by health benefits consultant Mercer reported health insurance costs would rise 5.4% in 2024, after a decade of average annual increases of 3 to 4%.

Rae said insurance plans are paying more for prescription drugs and "are definitely facing higher costs in wages."

On Oct. 13, Kaiser Permanente reached a tentative deal with 85,000 health care workers to raise wages 21% over four years and establish a minimum hourly wage of $25 for workers in California and $23 elsewhere. California Gov. Gavin Newsom also signed a bill to establish a minimum hourly wage of $25 for most health care workers.

While those higher wages, ultimately, will be paid by consumers and employers and government insurance plans, the higher labor costs are just one factor that causes prices to go up, said Johns Hopkins University professor Ge Bai.

Bai said hospital mergers are creating larger companies, which command enough power to raise prices when negotiating with insurers. They're raising prices because they see an opening to do so.

When health insurance and health care prices rise, it often correlates with lower wages for workers. Consumers have less to spend on housing, food and education, Bai said.

"Simply put, expensive insurance can actually harm Americans' health," Bai said.

No change in deductibles

Nine in 10 individuals who get insurance coverage from their employers also are charged a deductible – the amount a person must pay before insurance coverage kicks in.

The survey found employers charged an average deductible of $1,735, which is on par with last year's average. As with premiums, workers at smaller companies paid higher deductibles.

Consumers also often must shoulder copayments for doctors or hospital visits, and coinsurance that requires they pay a percentage of a medical bill.

The survey suggests companies are reluctant to significantly raise deductibles because they are concerned about shifting costs to workers. More than half of companies believe their workers were very or moderately concerned about affording their plan's cost-sharing requirements, according to the survey.

The survey also reported that companies are concerned about a lack of access to mental health care for employees. About one in three larger employers thought there were not enough behavioral health providers for timely mental health appointments. Only three in five employers said there were enough options to treat substance use disorders.