Healthcare in these United States certainly isn’t cheap. America spends $4.3 trillion annually on healthcare – that’s 17.8 percent of gross domestic product (GDP) and nearly twice as much as the average OECD country. It averages $12,914 per person.
Along with high healthcare spending has come rising health insurance costs. The average deductible is rising and outpacing wage growth. It’s especially problematic for businesses that offer employer-sponsored insurance (ESI), 87 percent of which believe the cost of providing these benefits would be unsustainable in the next five to ten years. That percentage rises to 98 percent for small businesses.
Here are a few examples of the rising costs:
- The average increase in 2023 in the cost of health coverage was 6.5 percent — now more than $13,800 per employee.
- The 2023 increase in health plan premiums for 2023 was twice the increase in 2022 due to inflation and utilization trends.
- Individual coverage premiums rose 58 percent, from an average of $5,049 annually in 2010 to $7,911.
- Over the same period, family coverage premiums rose more than 63 percent, from $13,770 to $22,463.
- The average deductible for a single coverage plan nearly doubled in the last decade, from $1,025 in 2010 to $2,004.
- More than one in every four workers with single coverage now has a deductible of at least $2,000, a substantial increase from one in every 10 workers in 2010.
How Rising Healthcare Costs Affect Employers and Employees
It’s no secret that many Americans aren’t able to afford the cost of healthcare — one in four say it’s the biggest concern facing their family. About one-third of insured adults worry about affording their monthly health insurance premium, and 44 percent worry about affording their deductible before health insurance kicks in.
Check out this survey result from the Commonwealth Fund: Among people who were insured all year in private health plans, 29 percent of those with coverage through an employer and 44 percent with individual market or marketplace coverage were underinsured. This means that their coverage was not enough to enable affordable access to health care, either because their reported out-of-pocket costs, excluding premiums and/or deductibles were high relative to their income.
Americans already are in nearly $200 billion worth of nationwide medical debt. Approximately 45 percent have skipped or delayed care because of the cost, and 42 percent have problems paying medical bills or are paying off medical debt.
Even roughly half of employers are struggling to afford the monthly costs of offering health coverage for workers. In addition to rising costs diminishing their ability to pay their workers a higher wage, many struggle to provide comprehensive coverage and balance the diverse needs of their employees. Some workers might want more mental health support, while others prefer a focus on retirement savings plans.
Many employers point to cost as the biggest challenge in offering health insurance to their employees. But, there are other factors, from complex administrative duties to compliance with various federal, state and local regulations.
What Does Affordable Healthcare Mean?
Consumers want access to affordable healthcare. That’s the biggest reason the concept of healthcare consumerism has become so popular.
What exactly is affordable healthcare, though? According to the American Hospital Association, it means different things to different consumers, patients, employers, government, providers and payers but is generally viewed as an issue of the cost of care. It’s influenced by many complex factors, including those that are societal, systematic and operational.
Healthcare.gov gives a bit of a different answer. The health insurance exchange website notes that a job-based health plan in 2023 is considered “affordable” if an employee’s share of the monthly premium in the lowest-cost plan offered by the employer is less than 9.12 percent of their household income. And, the lowest-cost plan must meet the minimum value standard.
Employee Perspectives on ESI
Ninety-six percent of employees view their health insurance as either “extremely” or “very” important to them. Aside from wages, it’s considered the most important benefit an employee can offer. Without it, they’re often not able to get timely healthcare.
That doesn’t mean employees think healthcare is affordable or any sort of a “value,” especially compared to years past. In a Gallup poll representing an estimated 97 million adults, respondents used the words “expensive” and “broken” to characterize the healthcare system.
Of employees enrolled in ESI, the majority are satisfied with the coverage of their plan — just not the lack of affordability of healthcare in the U.S. Nearly 85 percent of Americans believe the health insurance plan they get from their employer is more affordable than a plan they could find on open insurance markets.
Over 75 percent of workers believe insurance through employers is higher in quality than open market plans. In addition to the affordability of their plan, they cite comprehensive coverage, a choice of providers, consistency and free preventive services as the top reasons they’re satisfied with their current ESI.
It seems most employers agree that health insurance is important for their employees. Roughly 89 percent of employers rank health-related benefits as “very” or “extremely important” and prioritize them above retirement savings, leave, family care, education and transportation benefits.
The Role of Employers in Affordable Healthcare
Businesses with more than 50 employees are legally required to provide health insurance to employees as part of the Affordable Care Act (ACA). Although it’s not required for employees with fewer than 50 employees, some still offer it.
There are some priorities employers must consider, though, before selecting a plan. One is to ensure that any benefits plan decisions are nondiscriminatory. Other determinants should include company size and demographics, provider network size and structure, ease of use in submitting claims conducting other plan administration tasks and inclusion of preventative services.
This process requires a lot of research and comparison. It necessitates finding a balance between plans that are affordable but still adequate to meet employee needs. Employees want more and better coverage options: About half say they were only given one or two plan options by their employers.
It’s also important for employers to select the right type of plan for their employees and their business. Small group health insurance enables employees to benefit from the cost-sharing of their monthly premium between them and their employer. But these plans are sometimes costly and offer only one-size-fits-all options.
Health reimbursement arrangements (HRAs) allow small business employers to control their health spending by setting their own budgets. And, if employees do not utilize their full allowance at the end of the year, the employer gets to keep those funds for their business.
Another consideration when choosing a plan is understanding coverage plan types, such as exclusive provider organizations (EPOs), health maintenance organizations (HMOs), high deductible health plans (HDHPs), point of service plans (POSs) and preferred provider organizations (PPOs). Within each plan, compare premiums, deductibles, copayments and coinsurance structures. According to the Society of Human Resource Management’s (SHRM) annual Benefits Study, the most common health plans offered include:
- PPOs — 79 percent
- HDHPs — 62 percent
- HMOs — 31 percent
- HDHPs— 16 percent
- POSs — 16 percent
ESI and Employee Education
Offering ESI isn’t the only part of employees having healthcare through their employer. It’s a must to communicate the advantages of these benefits and how to use them. For example, employees should understand the contribution structure of their ESI.
On average, employees contribute 20 percent of their ESI premium for single coverage and 32 percent for family coverage. They pay an average of $111 per month for an individual plan and $509 per month for a family plan
Some employers provide assistance to their lower-wage employees to help them with the costs of participating in their health plans. Firms with a greater number of low-wage employees on average contribute 10 percent less toward single coverage premiums and 13 percent less to family coverage premiums than those with fewer low-wage employees.
The total average annual cost for ESI for single coverage is $7,911 for all plan types — $659 per month. For family coverage, the total annual cost is $22,463 —$1,872 per month. That includes both the employee’s and the employer’s share of costs.
Measuring the Impact of ESI
Sure, employers have to offer ESI to remain competitive with other businesses. It also enables them to attract and retain employees and spend less money doing so.
More than half of employers “strongly agree” that supporting ESI helps them hire and retain the best workers. One study found that employers with 100 or more employees who provide notable health benefits see a positive return on investment (ROI) of 47 percent.
Employee satisfaction is typically increased when quality ESI is offered. More than half of U.S. adults with ESI said that whether they like their health coverage is a key factor in deciding to stay at their current job. Similarly, 46 percent said health insurance was either the deciding factor or a positive influence in choosing their current job.
There is also a correlation between affordable healthcare and healthy employees. Unlike unaffordable or insufficient coverage which can harm employees’ physical and financial health, healthy employees benefit from having a lower risk of disease, illness and injury, increased work productivity, lower direct medical costs and a greater likelihood of contributing to their communities.
Businesses that support workplace health have a greater percentage of employees at work every day. That’s because healthier employees are less likely to call in sick or use vacation time due to illness.
ESI Education Through StenTam
We might not have solved the dilemma of the exact definition of affordable healthcare, but hopefully you now have a better understanding of the importance of employer-sponsored insurance and why choosing the best options for your employees is essential for not only financial sustainability but also that of a skilled workforce.
At StenTam Services, we’ll help you build and continue to refine a best-in-class benefits solution that ensures you’re always the employer of choice in your specific industry. Contact us today to learn more or get a quote!