Wages rising faster than job-based health insurance

Enjoy it while it lasts: Workers' pay has been growing faster than the cost of job-based health insurance.

This year, average pay rose 6.7%, while the average increase in premiums for family coverage ticked up 1%, according to the Kaiser Family Foundation 2022 Employer Health Benefits Survey. That follows a 5.1% pay gain in 2021 and a 4% increase in family premiums.

Those trends represent a major reversal for employer-sponsored insurance, which covers nearly 159 million Americans.

For at least two decades, the rising cost of family premiums regularly surpassed pay gains, and often by a big margin. From 2002 to 2012, annual increases in premiums — along with worker contributions toward those premiums — rose two to three times faster than earnings.

Along with higher deductibles and copays, these rising costs have steadily chipped away at family budgets.

Kaiser cited two factors for the slowdown in premium growth: There was a temporary decline in health services during the COVID-19 pandemic, and many insurance rates were set in the summer and fall of 2021 — before surging inflation became so evident.

That means the reprieve may end soon.

"This could be the calm before the storm, as recent inflation suggests that larger increases are imminent," Kaiser CEO Drew Altman said when the survey was released recently.

Price pressures are already coming home in Plano, Texas, where city employees must contribute 15% more for health care coverage in 2023.

Plano workers had not faced an increase in premiums since 2015. But the city had some catastrophic claims in '21 and '22, and could not simply tap reserves to keep premiums flat — as it did this year, said Andrea Cockrell, Plano's administrative services manager.

"For the most part, people have been understanding about it," Cockrell said of the double-digit increase. "But it's hard for them. They see it as their net pay going down."

Plano's benefits are still generous, with the city covering 90% of premiums for single coverage; that compares with employers nationwide paying an average of 83% of employee-only premiums in the Kaiser survey.

Plano workers will pay $485 a month for family coverage, an additional $63, while the city contributes $1,825 a month. Plano's annual premiums for family coverage are about 5% lower than the nationwide average, and that's after the 2023 rate increase.

"We feel like we have competitive benefits," Cockrell said. "What's challenging is that we have more constraints on our revenues than the private sector."