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Workers pay higher health costs

By Jay MacDonald ·
Friday, October 18, 2013
Posted: 6 am ET

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.

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October 18, 2013 at 4:52 pm

My ins. premium doubled this year. The annointed one lies!

October 18, 2013 at 4:42 pm

Wife and I are retired. Our Supplemental coverage increased by 34% for this year. We have now been informed that our coverage for next year will increase by 85%. I contacted the company and asked why the increase. I was read some "canned" bs about all the people signing up for insurance. My response was, "So I am not only paying for my Health insurance, I am now paying for some one else to have coverage." The individual I spoke with stated that all he tell me is what they have been provided in writing. He than told me that if I did not like it, I was free to look for other coverage {?} I worked long and hard for my retirement as did my wife. We paid our bills on time, paid all our taxes, raised five children and paid off two homes. YS, I resent the re-distribution of my money!!!

October 18, 2013 at 4:39 pm

I have been in HR for more than 15-years, and there has been an ongoing trend to move away from full HMO type healthcare, toward the HSA model. (So many years ago there was only catastrophic coverage - and my friends this is coming back.) During my HR career, working for 3 different national companies, I never saw premiums reduced. Over 10-years ago employers began pushing away dependents who could get coverage at their own jobs - after all, employers did not want to pay for a spouse who was entitled to enroll in a program through their own job. Who could blame them?

Technology and R&D costs in all industries have driven up costs, not only in healthcare. But the benefits have been enormous. The ACA itself is not driving up costs. Giving more people access to healthcare is the same as any business gaining more customers - gearing up costs money.

John M
October 18, 2013 at 4:18 pm

How do you forward this article to the President, the white house, and Congress?

Where does the word Affordable come into all of this?

October 18, 2013 at 3:52 pm

In response to Ellyn, What will happen when we are fully on Government healthcare and the Democrats and Republicans decide to play politics over some nonrelated issues and the government shuts down again (no matter who's fault)? This time they shut down self standing websites, they shutdown unmanned parks ( like the WWII memorial while opening the Mall for Immigration reformers), According to the AP they shut down: the FDA (so the food on our plate was putting us at risk) CDC slowing the response to the salmonella outbreak, the grant writing possibilities for the research of childhood asthma (so the poor child having an asthma attack was unable to benefit from the research that would not get done, the roads around Mt Rushmore so people could not stop to look at it (even though the road was not in a park). What happens next time when one of the parties decides to hold hostage the fully funded and implemented healthcare system in their little games of power grabbing? Will people be able to get care? If they can close all that they did this time in the game of lets not negotiate, then they could shut down an entire country's healthcare program just to blame it on the other party for the own political gain as both sides did this time and every time before this. Let's not be so naïve as to think that either side care a hoot about the people--it is all a game of who can blame who and come out smelling like a rose in order to gain the most power. A country totally dependent on the government is on that is totally under their thumb and fully controllable.

robert do
October 18, 2013 at 3:40 pm

if like that so obamacare that is a lie ,any insurance went higher than before now

Ian Moone
October 18, 2013 at 3:38 pm

At the end of October I will lose the health care coverage I had through my wifes employer. In looking for replacement coverage I was only mortified by what I now face. The cheapest rate was more then double what was previously being paid for but the worst of all of it is the structure of the plan as it covers only 50% of doctors visits and then activates once you have met the deductible value which was six thousand dollars. There were other plans where the decuctible was as low as 2500 but the ploicy is unaffordable. Our country has been gravely wounded by this law as I will be forced to buy something I will never be able to use because the costs are prohibitive. The afordable care act should have been put to a vote by the people.

Matthew Hanna
October 18, 2013 at 3:27 pm

I thought Obamacare was supposed to fix all of this??

October 18, 2013 at 3:25 pm

This seems like a thinly veiled attack on the ACA which is actually bringing healthcare cost down. Insurance rates always rise and will until we cut out the middleman and have a national healthcare system.

October 18, 2013 at 1:54 pm

I am a NJ state employee. I have read several Aon consulting reports to the state. Aon Hewitt makes regular recommendations to the state such as: discourage users from going to the doctors by making them pay more co-pays, discourage users from going to the emergency room etc., offer plans that have such high premium rates and co-pays that no one will or can use them, etc. Aon's projections are self serving and profitable. It's just more smoke and mirrors for politicians and insurers to deliver less while charging more.