Employees in 2012 saw lowest health insurance premium increase in 6 years

By Emmet Pierce Posted : 10/12/2012

health insurance premiums see smallest increase in six yearsThis year U.S. companies and their workers saw the smallest health insurance premium increase in six years, according to an analysis by Aon Hewitt, a global human resources company.

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In 2012, the average premium increase for large employers was 4.9 percent, down from 8.5 percent in 2011 and 6.2 percent in 2010. However, premiums are expected to increase by an average of 6.3 percent in 2013.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., says the slowing of premium increases likely has more to do with patients delaying medical procedures because of the recession than an improvement in the way the U.S. health care system operates.

"We've seen a decline in the rate of growth in health care costs in the economy generally," Baker says. "We have seen slower growth in other recessions. But is this is a case of the system actually straightening up or providers being more cost conscious? I think it is mainly the recession. I don't think we have cleaned up the system."

Health insurance premiums reflect stabilization

In a prepared statement, Tim Nimmer, chief health care actuary at Aon Hewitt, said there has been some stabilization in employment levels among businesses, a less severe impact from high cost claims and "a general movement towards consumer-driven plans."

As businesses have become more aware of how their costs will be affected by federal health care reform, 2012 premiums have been adjusted downward, he added. (See: "Health reform sticks: Now what?")

Aon Hewitt's analysis found that the average health care cost per employee was $10,522 in 2012, up from $10,034 last year. The amount of the total health care premium workers were required to contribute toward this cost was $2,204 in 2012, compared to $2,090 a year earlier. The average employee out-of-pocket cost, including copayments, coinsurance and deductibles, was $2,200 in 2012, a slight increase over $2,072 in 2011.

Looking at the year ahead, Aon Hewitt projects average health care costs per employee will rise to $11,188, and employees will contribute 21 percent of the total health care premium, which will average $2,385. Average employee out-of-pocket costs will rise to $2,429, according to Aon Hewitt.

If the projections are accurate, workers' share of health costs, including out-of-pocket expenses, will have risen from $3,199 in 2008 to $4,814 next year. That is a jump of more than 50 percent. (See: "5 ways your boss is down-sizing your health insurance.")

Cost increases vary by type of health insurance plan

Aon Hewitt says that companies, on average, will see 2013 cost increases of 7 percent for health maintenance organization (HMO) plans; 6.1 percent for preferred provider organization (PPO) plans; and 6.1 percent for point-of-service (POS). (See: "What is the difference between HMO and PPO health insurance plans?")

From 2012 to 2013, the estimated average cost per person for major companies will rise from $10,659 to $11,405 for HMOs; $10,433 to $11,069 for PPOs; and $11,062 to $11,737 for POS plans.

This year, major U.S. markets that saw rate hikes greater than the national average included San Antonio (7.4 percent), San Francisco/Oakland/San Jose (7.4 percent), Los Angeles (7.2 percent) and Austin, Texas (6.5 percent).

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