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Health insurance premiums rise faster than wages Posted: September 30th, 2012

By Barbara Marquand

Annual premiums for work-based health insurance rose by a smaller amount this year compared to previous years -- good news for employers and workers alike.

But this year's 4 percent increase still outpaced growth in wages and general inflation, according to the 2012 Employer Health Benefits Survey released by the Kaiser Family Foundation and Health Research & Educational Trust. Wages this year grew by just 1.7 percent, and general inflation was 2.3 percent.

This continues a long trend. In other words, you're not imagining things if you feel like it's been hard to get ahead financially in the last decade, despite working hard to earn raises.

Since 2002, premiums for employer-sponsored medical insurance have risen 97 percent, three times as fast as wages, which grew by 33 percent and inflation at 28 percent. This year the average annual premium for employer-sponsored family coverage is $15,745. Workers on average contribute $4,316 out of their paychecks toward the cost.

The average yearly premium for a single worker rose 3 percent this year to $5,165, with workers on average contributing $951 toward the cost.

Low-wage workers pay the most

The rising costs hit low- to moderate-income families the hardest. The survey showed that workers at lower-wage firms pay an average of $1,000 more per year out of their paychecks for family health insurance coverage than employees at higher-wage firms.

Low-wage workers also pay higher health insurance deductibles on average than high-wage workers. Among firms with many low-wage workers, 44 percent of covered employees face an annual deductible of at least $1,000. Among firms with many high-wage workers, 29 percent of covered employees face an annual deductible of that size.

Among the survey's other findings:

  • Sixty-one perent of firms offer health insurance benefits to workers -- the same as last year.
  • Thirty-one percent of employers offer health benefits to same-sex domestic partners, up from 21 percent three years earlier, and 37 percent of firms offer health insurance benefits to unmarried opposite-sex partners, up from 31 percent in 2009.
  • Ninety-one percent of larger employers, versus 41 percent of small employers, let workers pay their share of premiums with pre-tax dollars. Seventy-six percent of larger firms, compared to 17 percent of small employers, let workers contribute pre-tax dollars to flexible spending accounts for medical expenses.
What about next year? Employers who had information about next year's estimated costs reported an average premium increase of 7 percent in 2013. However, that figure could change. Employers could shop for less-expensive health plans or redesign their plans to bring premiums down for 2013.