Study Finds Health Insurance Costs are Not Shifting to Employees

Washington, D.C. – A new study by the Employment Policy Foundation finds that recent increases in employee health insurance costs do not represent a shift in cost from employer to employee, but reflect the larger trend toward escalating health care costs. In 2001, the average value of health care benefits for full-time private-sector employees and their families was $4,200. Of this total, employers paid approximately $3,254 and employees paid $946.

Since 1980, increases in the cost of health insurance benefits have outpaced inflation in dramatic fashion. Total health insurance costs per covered employee were $1,047 in 1980. These costs increased rapidly during the early 1990s, moderated by the constraining effects of managed care strategies in the mid-1990s. Since 1999, costs have begun to grow quickly again. The 2001 cost was 8.9 percent higher than the 2000 cost, a difference of $342 per employee. The portion of costs paid by the employer went up 9.6 percent—$286—and the portion paid by employees went up 6.4 percent—$57.

Since 1980, the percentage of health insurance costs paid by employers has remained relatively constant. Employers paid 82 percent of health insurance costs for employees who received health insurance coverage through their employer in 1980. During the 1992-93 recovery, that percentage declined to 77% and has remained level since then. During the past decade, increases in the employee cost of employer-sponsored plans reflect increases in the overall cost of care, not a shifting of costs from employers to employees.

Private-sector employers paid $187 billion toward the cost of employee health insurance coverage in 2001, the last year for which detailed data is available. This represents 77 percent of the estimated $243 billion annual cost of employer-sponsored health benefits. In 1980, the total cost of employer-sponsored health insurance benefits was $49.9 billion. The increase in health benefits costs for private-sector employer-sponsored plans has risen 373 percent, since 1980, a rate almost four times faster than the cost-of-living.

Rapidly increasing health insurance costs have reduced the proportion of private-sector full-time year-round employees with coverage under a plan sponsored by their employer from 79.0 percent to 65.5 percent, since 1980. Over the same time period, the proportion covered under a fully paid plan declined from 37.6 percent to 15.9 percent. The shift to cost-sharing plans primarily occurred before 1994, with increases in the percentage of cost-sharing plans being relatively small, since 1995. The increase in cost-sharing plans partially offset the decline in overall coverage levels. "The desire to provide health care benefits to their employees has led many employers to turn to cost-sharing plans as the overall cost of health benefits greatly exceeded inflation. Without cost-sharing, many more employers would be faced with the difficult decision of eliminating health benefits altogether," said Foundation President Ed Potter.

The study can be viewed online at http://www.epf.org/research/newsletters/2003/et20030113.pdf.




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