Younger, Low-Wage Employees Face Health Care Challenges

June 26, 2013 ( – Younger generations and lower-wage employees face the greatest health care challenges in terms of eligibility and cost, according to a report from the ADP Research Institute.

The report, “ADP Annual Health Benefits Report: 2013 Benchmarks and Trends for Large Companies,” highlighted trends in employer-provided health care benefits since 2010 to provide a benchmark for measuring the impact of the Affordable Care Act (ACA) on employer-provided benefits leading up to the implementation of the ACA’s Shared Responsibility provisions and the opening of public insurance exchanges in 2014.

“The report suggests that younger generations and lower-wage workers … are employees that employers will need to carefully consider when designing and communicating their 2014 benefits programs,” said Tim Clifford, president of ADP Benefits Administration Services.

Clifford said that in an effort to reduce the risk in their pool of covered workers and potentially reduce costs for the total covered population, employers may choose to extend coverage to employees who were not previously eligible. Employers may also opt to change the contribution tiers of coverage, adjust part-time/full-time hiring strategies or adjust their contribution to the coverage of dependents. All of these strategies, he said, could have far-reaching effects on U.S. businesses, employee compensation and the overall economy.

The research found health plan premiums are rising. The average monthly premium rose approximately 14% from 2010 to 2013. However, after a spike of nearly 8% between 2010 and 2011, the rate of increase moderated. Premiums rose approximately 3% in the last year. In 2013, the average monthly health plan premium was $832. While health plan premiums rose for employees of all ages, the steepest increase was among those younger than 30.

Younger employees were found to be less likely to be eligible for, and enroll in, health care plans. According to the report, between 2010 and 2013, the percentage of full-time employees who were eligible for employer-provided health benefits remained relatively steady at an average of 88%, and participation rates remained stable at an average of 65%. Although health benefits eligibility was found to decline slightly in every age group since 2010, younger employees faced the largest decrease, which may indicate that jobs taken by younger people were less likely to offer health benefits. When employees younger than age 30 were offered benefits, however, only half participated in their employer's health benefits program in 2013. The ability to obtain health coverage through a parent's health plan up to age 26 may be a partial explanation for this phenomenon, the report said.

The research also found health care costs represent the greatest burden for low-wage employees. While the cost of health care premiums as a percentage of income increased across all income levels, it increased more rapidly for lower-wage employees than any other group. In 2013, health care costs represented, on average, 8.4% of income for an employee earning between $15,000 and $20,000 versus 2.1% for an employee earning more than $120,000. This equates to higher total premium costs for higher income employees, but when adjusted for total covered lives, the report found these higher costs are a result of high-income employees covering more dependents.

In addition, there is wide range of health care cost disparity between various states. An analysis of 21 states with the largest employee populations showed the cost of health care plan premiums, as well as premium increases, varied widely from state to state. In 2013, of the 21 states analyzed, New Jersey had the highest monthly premium ($968) and North Carolina had the lowest ($733). Also in 2013, the employer's share of the health plan premium ranged from 79% in New York to 72% in Colorado.

The study used data spanning 2010 to 2013, covering 175 U.S.-based companies comprised of more than 600,000 employees each year. All companies used in the study had 1,000 or more employees for at least one of four years and no fewer than 800 in any given year. The employees surveyed were nonunion and full-time.

The report can be found here.