Snapshot: Employer Health Insurance Costs in the United States€¦ · Most Americans obtain health...

s n a p s h o t Employer Health Insurance Costs in the United States

July 2007

©2007 California HealthCare Foundation �

Employer Insurance Costs

Most Americans obtain health insurance coverage through employer-sponsored plans. Recent

proposals at the state level, including several in California, seek to expand access to employer-

based insurance. However, employers view rising health care costs as a challenge to their

ability to compete in an increasingly global economy. This snapshot provides an overview of

trends in employer health insurance costs in the United States. Much of the emphasis is placed

on premium contributions as a share of payroll because it is a central focus in the debate over

the role of employers in health care reform. Key findings include:

• While wages and salaries increased by 39 percent between 1996 and 2005,

health insurance costs to employers rose 97 percent.

• At offering businesses, the share of total compensation paid as health insurance

rose from 6 to 8 percent from 1996 to 2005. As health insurance costs increased,

the share of compensation paid as wages fell.

• Of those businesses that offered insurance, costs relative to payroll increased

34 percent between 1996 and 2005.

• Premium contributions as a share of payroll were highest for unionized businesses,

businesses with a high share of full-time workers, and low-wage businesses.

• Although the increase in health insurance costs was similar across businesses, increases

were highest for low-wage businesses. This may be due in part to the fact that

compensation for high-wage businesses has increased substantially, while for low-wage

businesses it has been stagnant.

Introduction

c o n t e n t s

Contribution and Compensation Trends

All Businesses . . . . . . . . . . . . . . . . . .3

Offering Businesses . . . . . . . . . . . . . .6

Overall Premium Contributions

as a Share of Payroll . . . . . . . . . . . . .9

by Worker Wage . . . . . . . . . . . . . . . .12

by Business Size . . . . . . . . . . . . . . . .16

by Industry . . . . . . . . . . . . . . . . . . . .18

by Union Status . . . . . . . . . . . . . . . .20

by Share of Full-Time Workers . . . . .22

Methodology . . . . . . . . . . . . . . . . . . . .24


$1,060 $1,007 $1,061 $1,158 $1,261 $1,367 $1,414 $1,541 $1,678 $1,936 $1,979$0

$500

$1,000

$1,500

$2,000

$2,500

20052004200320022001200019991998199719961995

$1,060 $1,007$1,061

$1,158$1,261

$1,367$1,414

$1,541

$1,678

$1,936 $1,979

Employer Insurance CostsPremium Contributions per Worker, AllBusinesses,1995–2005

trends

Employer premium

contributions almost

doubled between

1996 and 2005,

increasing from

$1,007 per worker

to $1,979.

Note: The statistics reported here also include businesses that do not offer health insurance, and thus do not incur any health insurance costs.

Source: Bureau of Labor Statistics’ Research Data Center, Employment Cost Index, data accessed between February 2006 and April 2007.


Health InsuranceWages and SalariesOther Benefits

37% 39%

97%

Employer Insurance CoststrendsEmployer Compensation,

Growth Rate, by Category, 1995–2005Compensation in the

form of health insurance

increased by 97 percent

between 1996 and

2005, compared to a

39 percent increase in

wages and salaries.

Note: The statistics reported here also include businesses that do not offer health insurance, and thus do not incur any health insurance costs. “Other Benefits” includes pensions, life and disability insurance, Workers Compensation, and Social Security.



3.1% 4.4%

83.4%84.9%

12.0% 12.2%

1996 2005

Health Insurance Wages and Salaries Other Benefits

Employer Insurance CoststrendsEmployer Compensation, by Category,

AllBusinesses,1996vs.2005In 2005, businesses

paid 4.4 percent of

compensation in the

form of health insurance

benefits, a 42 percent

increase from 1996.

Simultaneously, the share

of compensation paid

as wages and salaries

declined, and the share


as other benefits, such

as pensions and life

insurance, remained

stable.Note: The statistics reported here also include businesses that do not offer health insurance, and thus do not incur any health insurance costs. “Other Benefits” includes pensions, life and disability insurance, Workers Compensation, and Social Security.



52.5% 51.2% 54.7% 56.6% 59.3% 59.2% 58.1% 59.4% 56.0% 57.8% 56.4%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20052004200320022001200019991998199719961995

52.5% 51.2%54.7%

56.6%59.3% 59.2% 58.1% 59.4%

56.0% 57.8% 56.4%



trendsEmployers Offering Health Insurance, 1995–2005

Over the ten year

period shown, the

proportion of employers

offering health benefits

has ranged between

50 and 60 percent.


$2,056 $1,997 $1,953 $2,070 $2,180 $2,368 $2,532 $2,689 $3,134 $3,472 $3,703$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

20052004200320022001200019991998199719961995

$1,060 $1,007$1,061

$1,158$1,261

$1,367$1,414

$1,541

$1,678

$1,936 $1,979



Premium Contributions per Worker, offeringBusinesses,1995–2005

trends

For businesses that

offered health insurance,

costs increased by

approximately $1,700 per

worker, or 85 percent,

between 1996 and 2005.

The percentage increase

was slightly lower for

offering businesses

than for all businesses

because part of the

cost increase for all

businesses came from

a slight increase in the

share of employers that

offered insurance.


6.1%8.2%

79.5%82.1%

11.8% 12.3%

1996 2005

Health Insurance Wages and Salaries Other Benefits



trendsEmployer Compensation, by Category, offeringBusinesses,1996vs.2005

For the roughly 56

percent of businesses

that offered health

insurance, premium

contributions accounted

for 8.2 percent of total

compensation in 2005,

up from 6.1 percent in

1996. As the percentage


as health insurance

increased, the share of

compensation paid as

wages and salaries fell.


2005200320001996

8.0% 8.0%

9.8%

10.7%

Employer Insurance CostsasashareofPayrollPremium Contributions as a Share of Payroll,

offeringBusinessesAverage employer

premium contributions

relative to payroll rose

by 34 percent between

2000 and 2005.

Note: Payroll includes all employee wage and salary compensation, including regular wages, vacation pay, pay for other leave, and overtime, and is equivalent to “wages and salaries” noted in previous graphs. Payroll does not include health insurance compensation or other benefits, such as pensions.


©2007 California HealthCare Foundation 10

0%

2%

4%

6%

8%

10%

12%

14%

16%

200520001996

10.2%

6.7%

3.8%

10.9%

6.8%

3.8%

14.3%

9.7%

5.6%

75th Percentile50th Percentile (median)

25th Percentile

Employer Insurance CostsasashareofPayrollPremium Contributions as a Share of Payroll,

offeringBusinesses,DistributionovertimeHealth insurance


relative to payroll were

stable between 1996 and

2000, but rose sharply


Businesses in the

25th percentile saw

the greatest proportional

increase at 47 percent

from 2000 to 2005.




200520001996

3.2% 3.4%

9.5%

Employer Insurance CostsShare of Offering Businesses with Premium Contributions Over 20 Percent of Payroll

asashareofPayroll

The proportion of

businesses with


in excess of 20 percent

of payroll almost tripled

between 1996 and

2006, with most of this

increase occurring after

2000.




Lowest Wage Quartile

Highest Wage Quartile

Lowest Wage Quartile

Highest Wage Quartile$39,906

$56,435

$12,769

$13,188

$2,825

$5,268

$697

$1,319

19962005

Premium Contributions

Payroll

Employer Insurance CostsHealth Spending and Payroll per Employee, Offering Businesses, by Worker Wage, 1996 vs. 2005 Average payroll per

employee increased

by 41 percent for

the highest wage

businesses, but went up

only 3 percent for the

lowest wage businesses


In contrast, premium

contributions increased

by approximately the

same proportion (just

under 90 percent) for

both groups.

Notes: Payroll includes all employee wage and salary compensation, including regular wages, vacation pay, pay for other leave, and overtime, and is equivalent to “wages and salaries” noted in previous graphs. Payroll does not include health insurance compensation or other benefits, such as pensions. Highest wage quartiles for 1996 and 2005 were $12.59/hr and $18.31/hr, respectively. Lowest wage quartiles for 1996 and 2005 were $6.60/hr and $8.99/hr. Figures are reported in nominal dollars and are adjusted for inflation.


by Worker Wage

©2007 California HealthCare Foundation 1�

200520001996

6.3%

8.1%

7.3%7.6%

9.8% 9.7%

Highest Wage QuartileLowest Wage Quartile

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,byWorkerWage,selectedYears Offering businesses

with wages in the

bottom quartile had a

55 percent increase in

average health insurance


relative to payroll


By 2005, both low- and

high-wage businesses

spent approximately

10 percent of payroll

on health insurance

premiums.

byWorkerWage

Note: Payroll includes all employee wage and salary compensation, including regular wages, vacation pay, pay for other leave, and overtime, and is equivalent to “wages and salaries” noted in previous graphs. Payroll does not include health insurance compensation or other benefits, such as pensions. Highest wage quartiles for 1996 and 2005 were $12.59/hr and $18.31/hr, respectively. Lowest wage quartiles for 1996 and 2005 were $6.60/hr and $8.99/hr. Figures are reported in nominal dollars and are adjusted for inflation.



0%

2%

4%

6%

8%

10%

12%

14%

16%

2005199620051996

7.3%

4.2%

1.9%

14.1%

7.4%

3.9%

10.5%

6.6%

4.0%

12.9%

8.9%

5.5%


25th Percentile

Lowest Wage Quartile Highest Wage Quartile

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,DistributionbyWorkerWage,1996vs.2005

byWorkerWage

Employer premium

contributions as a

share of payroll rose

substantially for low-

wage businesses across

the distribution. For

example, contributions

as a share of payroll for

low-wage businesses at

the 75th percentile of

spending almost doubled

between 1996 and

2005, compared to a

23 percent increase for

high-wage businesses.Note: Payroll includes all employee wage and salary compensation, including regular wages, vacation pay, pay for other leave, and overtime, and is equivalent to “wages and salaries” noted in previous graphs. Payroll does not include health insurance compensation or other benefits, such as pensions. Highest wage quartiles for 1996 and 2005 were $12.59/hr and $18.31/hr, respectively. Lowest wage quartiles for 1996 and 2005 were $6.60/hr and $8.99/hr. Figures are reported in nominal dollars and are adjusted for inflation.



200520001996

3.2%2.6% 2.7%

2.2%

12.7%

6.8%

Highest Wage QuartileLowest Wage Quartile

Employer Insurance CostsbyWorkerWageShare of Offering Businesses with Premium

Contributions Over 20 Percent of Payroll, byWorkerWage In 2005, almost

13 percent of low-wage

businesses had premium

contributions in excess

of 20 percent of payroll,

compared to almost

7 percent of high-wage

businesses.

Note: Payroll includes all employee wage and salary compensation, including regular wages, vacation pay, pay for other leave, and overtime, and is equivalent to “wages and salaries” noted in previous graphs. Payroll does not include health insurance compensation or other benefits, such as pensions. Highest wage quartiles for 1996 and 2005 were $12.59/hr and $18.31/hr, respectively. Lowest wage quartiles for 1996 and 2005 were $6.60/hr and $8.99/hr. Figures are reported in nominal dollars and are adjusted for inflation.



100+ Workers25–99 Workers< 25 Workers

8.2%

11.1%

7.1%

9.0%

8.2%

10.7%

20051996

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,bysize,1996vs.2005

byBusinesssize

All offering businesses,

regardless of size,

experienced growth in

average health insurance


relative to payroll


Contributions grew from

approximately 8 to 11

percent of payroll for

small and large business

and 7 to 9 percent of

payroll for mid-sized

businesses.




0%

2%

4%

6%

8%

10%

12%

14%

16%

200519962005199620051996

10.4%

6.7%

3.8%

14.6%

10.1%

5.9%

12.6%

7.5%

4.3%

10.7%

7.1%

5.0%

< 25 Workers 25– 99 Workers 100+ Workers

9.6%

6.0%

3.4%

14.3%

9.5%

5.9%


25th Percentile

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,Distributionbysize,1996vs.2005

byBusinesssize

Employer premium

contributions relative

to payroll increased

at all points in the

distribution, regardless of

business size. Mid-sized

businesses had slightly

lower contributions as

a share of payroll at the

25th, median, and

75th percentiles, both in

1996 and in 2005.




ServiceTrade, Transportation,and Utilities

ManufacturingConstructionand Mining

8.4%

10.5%

9.3%

7.8%

11.4% 11.2%

8.0%

10.3%

20051996

Employer Insurance CostsbyIndustryPremium Contributions as a Share of Payroll,

offeringBusinesses,byIndustry,1996vs.2005Although average

employer premium

contributions relative

to payroll ranged from

approximately 10 to 11

percent regardless of

industry in 2005, rates of

growth differed across

industry. The trade,

transportation, and utility

sector had the largest

increase — moving from

7.8 to 11.2 percent

of payroll — while the

manufacturing sector had

the smallest increase.Note: Payroll includes all employee wage and salary compensation, including regular wages, vacation pay, pay for other leave, and overtime, and is equivalent to “wages and salaries” noted in previous graphs. Payroll does not include health insurance compensation or other benefits, such as pensions.



0%

2%

4%

6%

8%

10%

12%

14%

16%

ServiceTrade, Transportation,and Utilities

ManufacturingConstructionand Mining

15.0%

8.8%

5.2%

14.8%

10.8%

6.5%

14.6%

9.9%

5.7%

13.8%

9.5%

5.5%


25th Percentile

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,DistributionbyIndustry,2005

byIndustry

In 2005, the median

premium contribution

relative to payroll was

lower in the construction

and mining sector than

in other industries, but

25 percent of these

businesses had health

insurance contributions

in excess of 15 percent

of payroll.



©2007 California HealthCare Foundation �0

200520001996

7.7%

11.6%

7.8%

11.2%10.4%

14.5%

UnionNo Union

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,byUnionstatus,selectedYears Although the average


relative to payroll

increased across all

offering businesses

between 1996 and 2005,

businesses with a union

presence had higher

relative contributions

than businesses without

a union presence.

byUnionstatus



©2007 California HealthCare Foundation �1

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2005199620051996

10.0%

6.5%

3.7%

13.8%

9.5%

5.4%

13.9%

11.3%

8.6%

18.7%

13.7%

10.0%


25th Percentile

No Union Union

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,DistributionbyUnionstatus,1996vs.2005

byUnionstatus

Premium contributions

relative to payroll for

both unionized and non-

unionized businesses

increased across the

distribution. In 2005,

25 percent of unionized

businesses had health

insurance costs in

excess of 18.7 percent

of payroll.



©2007 California HealthCare Foundation ��

200520001996

7.2%

8.3%

7.0%

8.4%

9.8%

11.2%

> 75% Full-Time Workers<_ 75% Full-Time Workers

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,byshareofFull-timeWorkers,selectedYears Offering businesses

with a high share of

full-time workers had

higher average premium

contributions relative to

payroll than businesses

with a lower share of

full-time workers. This

may reflect the fact that

businesses with a larger

proportion of full-time

workers provided health

insurance benefits to

a larger share of the

workforce.

byshareofFull-timeWorkers




0%

2%

4%

6%

8%

10%

12%

14%

16%

2005199620051996

9.2%

5.3%

2.7%

13.3%

7.6%

4.5%

10.6%

7.5%

4.4%

14.6%

10.4%

6.3%

<_ 75% Full-Time Workers > 75% Full-Time Workers


25th Percentile

Employer Insurance CostsPremium Contributions as a Share of Payroll, offeringBusinesses,DistributionbyshareofFull-timeWorkers,1996vs.2005 Employer premium

contributions relative to

payroll rose across the

distribution, regardless

of the share of full-time

workers.

byshareofFull-timeWorkers




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For more InFormAtIon

California HealthCare Foundation

476 9th Street

Oakland, CA 94607

510 .238 .1040

www .chcf .org

Employer Insurance CostsMethodology

This analysis is based on data from the Employment Cost Index, a quarterly survey of

establishments conducted by the U.S. Bureau of Labor Statistics. The figures presented are

unadjusted for changes in the composition of businesses that occurred between 1996 and

2005. In unreported analyses, it was confirmed that trends are similar after statistically adjusting

for business characteristics.

Throughout this analysis both average costs and costs at the median and extremes of the

distribution were considered. Evaluating the distribution of costs is important because averages

can be heavily influenced by a small number of observations with very high or very low costs.

Authors

Christine Eibner, Kanika Kapur, and M. Susan Marquis, RAND

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Snapshot: Employer Health Insurance Costs in the United States€¦ · Most Americans obtain health...

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