As Obamacare Premiums Soar, Employers Raise Deductibles to Keep Costs Down
Health Care

As Obamacare Premiums Soar, Employers Raise Deductibles to Keep Costs Down


While many Americans reliant on Obamacare’s subsidized insurance policies are bracing for major premium increases next year of as much as 30 percent to 50 percent in some regions of the country, a far more encouraging picture has surfaced in the much larger arena of employer-provided health insurance, according to two new studies released this week.

By way of comparison, about 10.4 million Americans purchased their insurance through government operated health care exchanges during the first half of 2016, but roughly 154 million other Americans are covered by their employers or the employer of a family member. 

While Obamacare costs have steadily risen, growth in the total health-benefit costs for coverage provided by employers to their workers slowed to near record lows during the past several years, according to research by the Commonwealth Fund, a nonpartisan health care research foundation, and Mercer, a consulting firm. 

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Among the key findings, the growth in employees’ share of the health care premiums slowed over the past decade, including the period when Obamacare was being brought online, and employers began preparing for the new requirements under the law, according to the Commonwealth Fund report.

But premiums are only part of the picture. The Commonwealth Fund concluded, “Many insured Americans view their health care costs as unaffordable [because] deductibles continue to proliferate and their annual growth rate exceeds premium growth by a wide margin.”

Researchers crunched federal data to compare cost trends in the private sector over a 10-year period, between 2006 and 2015. Compared with the five years leading up to Obamacare’s implementation, “premium growth for single health insurance policies offered by employers slowed both in the nation overall and in 33 states and the District of Columbia.”  

More specifically, for individual plans – the average premium growth rates slowed to 3.8 percent per year from 2010 to 2015 compared with an average 4.7 percent from 2006 to 2010, according to the study. Contributions to family policies grew 4.8 percent annually in the most recent period compared to 6.5 percent in the five years before the advent of Obamacare.

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Louisiana led the way, as that state’s average annual premium growth dropped from 7.8 percent annually between 2006 and 2010 to just 2.4 percent between 2010 and 2015. Meanwhile, nine other states including Florida, Maine, Minnesota, Mississippi, Nebraska, Nevada, Oregon, Tennessee and Wisconsin saw a decline in annual premium growth of at least three percentage points, the report said.

On the downside, premium growth rates stayed stubbornly high in eight other states:  Alaska, Hawaii, Idaho, Kentucky, Maryland, New Hampshire, New York, and Utah. These states experienced average growth rates of five percent or higher between 2010 and 2015.

The Mercer study confirms the steady leveling off of premiums on health insurance policies provided by the nation’s businesses.

The total cost of health benefits per worker enrolled in employer-sponsored health care plans rose 2.4 percent to $11,920 on average in 2016, compared with 3.8 percent in 2015, according to the new report. Mercer said that employer benefit costs are likely to rise by 4.1 percent in 2017, a modest increase at most. For a fifth straight year, employers will hold cost growth to less than five percent, according to the consulting firm.

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There are several major caveats to the positive news in the two studies suggesting that many Americans who get their coverage through employers and who are not subsidized by taxpayers through Obamacare are still feeling a pinch because of high deductibles.

Commonwealth points out, “Middle-income families continue to see a growing share of their household budgets going to health care. Where employees have less generous health plans as well as lower median incomes, the combination is particularly toxic. People with high deductibles relative to income are far more likely to avoid getting needed care than those with more affordable out-of-pocket costs.”

As Mercer points out, even as the growth in the cost of employer coverage plateaued, many workers were shifted to high-deductible plans that are linked to a health savings account or health reimbursement arrangement. “Despite a recent surge, income growth has not kept pace in many areas of the U.S.,” the report states.

The enrollment in these high-deductible plans – with out-of-pocket costs of $1,300 for individual coverage and $2,600 for family coverage – rose by 29 percent of all covered workers who were surveyed last summer.

Moreover, even as the growth rate in premiums and deductibles for policies provided by employers slowed since the advent of the Affordable Care Act, many families in regions of the country where incomes haven’t kept pace with the national average continue to struggle to cover their health insurance costs.