The relentlessly rising cost of employer-based health insurance continued to moderate this year, in response to plan changes and vendor deals fueled by health care reform. But workers' share of their health insurance bills continued to rise, according to a new analysis from consulting firm Aon Hewitt.
First, the good news: Company health plan cost increases have slowed to a national average of 3.3 percent, the lowest annual increase in a decade and well below last year's 4.9 percent. Still, the average per-employee cost of health care has set a new record at $10,471, up $340 from last year's average of $10,131. In 2012, the average rose into five figures for the first time.
Meanwhile, large employers continue to shift more and more of their health care costs onto their workers.
Out-of-pocket costs jump nearly 13 percent
The average employee contribution for health coverage has risen from $2,200 last year to $2,303, representing 22 percent of the overall plan premium. The picture is no brighter for out-of-pocket expenses, where employees saw their average outlay for things like deductibles, copayments and coinsurance jump from $1,984 to $2,239. That 12.8 percent increase is more than double last year's 6.2 percent hike.
Health care cost increases varied by employer plan type. For example, the average cost nationwide of health maintenance organization (HMO) plans have risen 4.9 percent this year, down from 5.5 percent in 2012, and preferred provider organization (PPO) plans have gone up 2.7 percent, also down from 4.7 percent the previous year. However, point-of-service (POS) plans rose 4.5 percent, up from a 3.8 percent increase in 2012.
Your address makes a difference
Where you live also has an impact on your health spending. If you live in Washington, D.C., Los Angeles, Orange County or the Oakland-San Francisco-San Jose region of California, your health expenses have risen above the national average, while residents of Atlanta, Milwaukee and New York City have seen below-average increases this year.
Now the bad news: Aon Hewitt predicts that this year's 3.3 percent overall health cost increase will more than double next year to 6.7 percent, with an average employee paying $2,499 in premiums and $2,740 for out-of-pocket expenses. If this projection holds true, an employee's share of health care costs will have increased 150 percent over the past decade, from $2,011 in 2004 to $4,969 in 2014.
"There are many factors that contributed to the lower rate of premium increases we saw over the past two years that we don't expect to continue in the long-term," says Aon Hewitt chief health care actuary Tim Nimmer. "These include the lagged effect from the economic recession on health care spending and continued adjustments as employers and insurers phase out the conservatism that was reflected in earlier premiums due to uncertainty around economic conditions and health care reform."
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Jay MacDonald is a Bankrate contributing editor and co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters.