Personal Finance

Employers to spend about $10,000 on health care for each worker

Key Points
  • Health care benefits per worker will run more than $14,000.
  • Study shows the average employee will pay $4,200 next year.
  • Biggest driver of increases are high-priced pharmaceuticals.

Employees at big companies should be prepared to pay 5 percent more for their health care next year.

New results from an industry organization's annual study shows that large employers expect the total average per-employee cost for health insurance benefits — which includes premiums and out-of-pocket costs for employees and dependents — to rise in 2018 to $14,156 from $13,482 this year.

With employers covering about 70 percent of that cost, the average worker will pay 30 percent of the tab, or about $4,200.

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"I think you'll see [the 5 percent rise] in premium increases," said Brian Marcotte, president and CEO of the Washington, D.C.-based National Business Group on Health, which released the study this week. "Most people will probably see minimal changes to deductibles and co-pays unless they move to a [higher-deductible] plan."

This marks the fifth consecutive year that health care costs are expected to rise by 5 percent, according to the study. That outpaces the rate of inflation, which was 2.54 percent in 2016 and 2 percent for the first half of 2017.

Workers' salaries also aren't rising as quickly as health care costs. The most recent data from the Federal Reserve shows that wages are growing by 3.2 percent annually.

Source: National Business Group on Health

The National Business Group of Health's annual study surveyed 148 companies, 79 percent of which have 10,000 or more employees. It shows that employers rank the cost of "specialty pharmaceuticals" as the top driver of cost increases, which is unchanged from last year's survey results.

Basically, new treatments for specific conditions ranging from diabetes and asthma to hemophilia and immune disorders can come with hefty price tags.

"There's a rich pipeline of specialty medicines," Marcotte said. "They can be thousands or tens of thousands of dollars per treatment."

Source: National Business Group on Health

Marcotte said that the cost can vary depending on where the treatment is administered (i.e., a hospital or doctor's office or even in the home). The survey shows that 44 percent of companies plan to combat pharma costs in part by better managing where patients receive those high-price medicines.

Employers also increasingly have been offer high-deductible plans as a way to control costs. The study shows that by next year, 90 percent of large companies will offer this option.

Under these plans — sometimes called consumer-driven health plans in industry lingo — employees can put away tax-deductible savings in a health savings account, or HSA. For 2017, contribution limits are $3,400 for individual coverage and $6,750 for family plans. An extra $1,000 is allowed for people age 55 or older.

HSA balances can carry over from year to year, and withdrawals are tax-free as long as they go toward qualified medical expenses.

The survey also says that without such various cost-cutting measures being implemented by employers, overall costs would increase by 6.6 percent next year instead of the anticipated 5 percent.