September 29, 2015

Obamacare Costs Outstripping Wages


  • Over the last five years, employer-sponsored health insurance premiums have risen twice as fast as wages; deductibles have risen almost seven times as fast.

  • Premiums for the average employer-sponsored individual insurance plan are more than $6,000 a year, an increase of 24 percent from 2010.

  • Deductibles for individual plans in the employer-sponsored market are up an average of 67 percent to over $1,000.

  • President Obama promised premiums would decline $2,500 per family; instead average premiums in the employer-sponsored market have soared $3,775.


Premiums and deductibles have gone up

Deductible and Premiums Rising Chart

A new report from the Kaiser Family Foundation shows that, on average, Americans with employer health care coverage – approximately 147 million people – are paying higher premiums and higher deductibles under Obamacare.

Average premiums for individual coverage in the employer-sponsored market have increased more than twice as fast as workers’ earnings. Since Obamacare was signed into law in 2010, these premiums are up 24 percent, while average worker earnings have only increased by 10 percent. Individual premiums are now $6,251, up from $5,049 in 2010. Average deductibles for individual plans in this market have risen 67 percent from $646 in 2010 to $1,077 in 2015.

Family premiums in the employer-sponsored market have increased even faster: up 27 percent since 2010 to over $17,000 annually. President Obama promised that the average family would save $2,500 per year by the end of his first term. In reality, the average family premium in this market is $3,775 higher than it was when Obamacare became law.

Tax hikes and mandates push employers to high-deductible plans

Obamacare’s many new costs, mandates, and taxes have driven the rise in health insurance premiums. One new tax is set to take effect in two years, and it is already affecting employer insurance offerings. The “Cadillac Tax” is a 40 percent tax on the portion of annual health insurance premiums that exceeds $10,200 for individuals and $27,500 for families. In anticipation of this huge tax increase, employers have already begun offering health insurance plans that rely on more employee cost-sharing. The tax will harm a growing number of people since it is indexed to regular inflation, which grows less quickly than the inflation rate for health care.

With the government mandating so much of what health insurance plans must cover, employers have few other options for avoiding the 40 percent excise tax other than increasing employee cost-sharing. According to the Kaiser Family Foundation, last year 53 percent of employers with 200 or more workers looked into whether their plans would exceed the Cadillac tax thresholds. Nineteen percent found that their plan with the largest enrollment would.

Premiums will be higher next year

Under Obamacare, some employees are effectively forced to choose high-deductible plans. As premiums on health plans continue to rise, workers see fewer options they can afford. High-deductible plans tend to come with lower premiums.

“[T]he steady upward creep in health insurance deductibles has easily outpaced the average increase in a worker’s wages over the last five years.”

                                                                   – New York Times, September 22, 2015

The 27 percent increase in family premiums since Obamacare became law is just the start. Many Americans are beginning to learn that their 2016 premiums will be significantly higher than this year. Last week large rate hikes were published in Montana. Premium increases in the individual and small group markets will range from 22 to 34 percent. Similar rate hikes are being announced in other states across the country.

Issue Tag: Health Care