The Employer Health Benefits 2011 Annual Survey by the Kaiser Family Foundation and the Health Research & Education Trust (HRET) confirmed a trend that many business owners have long suspected – health insurance premium increases are rising at a rate that far exceeds inflation. And the pace of health insurance premium increases has accelerated since the passage of the Patient Protection and Affordable Care Act in 2010.
The Kaiser/HRET study had several key findings[i], including:
- The 2011 average annual premium for employee coverage increased by 8% from 2010 to $5,429, which equates to a monthly premium of $452.
- The 2011 average annual premium for family coverage increased by 9% from 2010 to $15,073, which equates to a monthly premium of $1,256. This is a significant increase from the 3% rise in premiums from 2009 to 2010.
- Since 1999, health insurance premium increases have cumulatively risen by 160%, compared to a cumulative inflation rate of 38%.
- Both small and large businesses pay similar premiums for employee coverage, with only a 3% difference in annual premiums.
- However, large businesses pay an average of 10% higher premiums than small businesses for family coverage. This may be due to differences in health plan designs.
The latest data on US wages shows that the average annual gross wage for 2009 was $40,712[ii]. If we use this wage as a denominator, health premiums are more than 13% of employee wages. Payroll taxes, workers compensation insurance and other employee benefits represent another 12% of gross wages. So the average total employee burden is approximately 25% over and above employee wages. As such, the average total human capital cost, including wages, taxes and benefits is approximately $51,000 per employee per year.
For employers that are already coping with rising costs and tepid revenue growth, this study is an obvious cause for concern. But PinnacleHR offers proven methods to provide top quality employee benefits while controlling human capital costs. To learn how PinnacleHR can help your company, contact us today!