Employers Still Footing Employee Health Care Bill

January 15, 2003 (PLANSPONSOR.com) - While health care costs have been increasing at a breakneck pace, employers have maintained the same percentage of overall employee costs, according to a recent study by the Employment Policy Foundation.

The study points to the average value of health care benefits for full-time private-sector employees and their families at $4,200 in 2001, the last year for which detailed data is available. Of this total, employers paid approximately $3,254 and employees paid $946.

Looking at the numbers since 1999, costs have begun to grow rapidly. The 2001 cost was 8.8% higher than the 2000 cost, a difference of $342 per employee. The portion of costs paid by the employer went up 9.6%, $286, and the portion paid by employees went up 6.3%, $57.

Union employees have also not been immune to the cost of rising health care. Total cost for union plans rose $367 from 2000 to 2001, representing an increase of 8.4%. Overall, it was the employers footing the bill for this increase, paying $229 of the added annual cost per union member employee in 2001 compared to 2000.

Overall, since 1980, the percentage of health insurance costs paid by employers has remained relatively constant. Employers paid 82.0% of health insurance costs for employees who received health insurance coverage through their employer in 1980. Since 1992 the percentage declined to 77.0% and has remained at approximately the same level since. The study says these results show that during the past decade, increases in the employee cost of employer-sponsored plans reflect increases in the overall cost of care, not a shifting of costs from employers to employees.

Private-sector employers paid $187 billion toward the cost of employee health insurance coverage in 2001. This represents 77% of the estimated $243 billion annual cost of employer-sponsored health benefits. In 1980, the total cost of employer-sponsored health insurance benefits was $49.9 billion. The increase in health benefits costs for private-sector employer-sponsored plans has risen a whopping 373%, since 1980, a rate almost four times faster than the cost-of-living.

Rapidly increasing health insurance costs have reduced the proportion of private-sector full-time year-round employees with coverage under a plan sponsored by their employer from 79.0% to 65.5%, since 1980. Over the same time period, the proportion covered under a fully paid plan declined from 37.6% to 15.9%. The shift to cost-sharing plans primarily occurred before 1994, with increases in the percentage of cost-sharing plans being relatively small, since 1995. The increase in cost-sharing plans partially offset the decline in overall coverage levels.