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Rising Health Insurance Premiums: What it Means for Your Pocketbook

By Meredith Ledford on December 12th, 2009
Health Insurance

As health insurance reform continues to dominate much of the national domestic policy agenda, you and your family may be concerned about whether your paycheck will keep up with the rising cost of health insurance. Because employer-based insurance is the main source of health insurance coverage for individuals and families--nearly 59% of all Americans have this type of coverage--it can serve as a good barometer of what is happening with health insurance premiums in the group insurance market.

Recent trends in employer-based coverage show that there is reason for you to be concerned. Over the past decade, fewer and fewer employers are offering group health insurance, and the rising cost of health insurance is outpacing the increase in earnings.

Health Insurance Affordability Eroding

Here's a closer look at these two facts:

  • More than 9% fewer businesses offer group health insurance than a decade ago. A recent survey by the Kaiser Family Foundation found that 60% of businesses in 2009 offered health benefits, compared to 66% in 1999. The decline for small businesses (those with 3-9 employees) offering health insurance coverage was even greater: in 1999, 56% of small businesses offered health insurance, compared to 46% in 2009. This is a decline of nearly 18%. Among the businesses that continue to offer health insurance coverage, 21% reported in the survey that they "reduced the scope of health benefits or increased cost-sharing due to the economic downturn," and 15% reported that they "increased the worker's share of the premium."

  • Health insurance premiums increased nearly 3.5 times faster than wages over the past decade. According to the same analysis from the Kaiser Family Foundation, health insurance premiums for family coverage rose 131% between 1999 and 2009. Comparatively, the rate of increase for general inflation (28%) and wages (38%) during this same timeframe was much lower. In 2009 alone, family coverage premiums saw a 5% increase while general inflation fell 0.7% and wages increased only 3.1%. In dollar terms, the average group family policy offered through an employer in 2009 cost the employee $3,515 and the employer $9,860, for a total health insurance premium of $13,375.

Health Insurance Costs Ahead

The outlook is not much better for next year. The same survey asked businesses about their health insurance plans for 2010. Twenty-one percent of businesses offering coverage said they are "very likely" to raise their employees' contribution to premiums and 16% say they are "very likely" to raise deductibles (the amount you pay out-of-pocket before your insurance benefit kicks in). However, in better news, only 2% say they are "very likely" to drop health insurance coverage altogether in the coming year.

Though Congress continues to debate health insurance reform, the employer-based system will continue to play a major role in the health insurance system in the future. The current statistics show that your pocketbook will continue to take a hit as employers are forced to push more health insurance costs onto workers to maintain coverage options and wage increases.

In such an employee health insurance environment, it is more important than ever to scrutinize your health insurance options carefully and compare policies. Obtaining online quotes from multiple insurance agents is one way to ensure that you have the coverage you need at competitive rates.

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