This report delves into trends in group health insurance in 2023, providing insights into the trends that continue to shape the industry in 2024. Utilizing data from the Kaiser Family Foundation’s 2023 Employer Health Benefits Survey, we will outline key statistics and trends that brokers and PEOs need to know regarding insurance dynamics in 2023.

As businesses of all sizes seek innovative strategies to navigate the evolving healthcare landscape, we observe a shift towards alternative approaches, particularly among smaller entities.

Embracing Health Reimbursement Arrangements (HRAs) alongside level-funded and stop-loss strategies has emerged as a viable solution for businesses aiming for cost-effective measures and enhanced control over healthcare spending. Additionally, the notable increase in Individual Coverage Health Reimbursement Arrangement (ICHRA) enrollment underscores the rising demand for flexible healthcare options.

For brokers and PEOs, grasping these overarching trends is essential for offering tailored solutions that meet clients' diverse needs and adapt to the changing dynamics of the healthcare industry in 2024.

In 2023, employer-sponsored health insurance costs rose significantly, with single coverage premiums averaging $8,435/year and family coverage premiums hitting $23,968/year, a 7% increase from the previous year. This outpaced both wage growth and inflation. On average, employees contributed 17% towards single coverage premiums and 29% towards family coverage.

This is a big change compared to 2022, which didn’t see as much of an increase. This suggests that overall inflation and rising prices in the economy since 2022 are now impacting insurance premiums. While inflation and wages are expected to level off over the next couple of years, it might take a bit longer for insurance prices to catch up.

While we do see a spike in premium costs in the last year, when you look at the data over the past five years, the cost of family insurance has gone up by 22%, which is about the same as how much prices in general have gone up (21%) and how much wages have gone up (27%). Brokers and PEOs should keep an eye on how inflation continues to impact premium costs in 2024.

• Overall Increase: The average annual premium for employer-sponsored health insurance in 2023 increased by 7% for both single and family coverage compared to the previous year, outpacing the 5.2% increase in workers' wages and 5.8% inflation.
• Long-Term Trend:  Over the last five years, the average premium for family coverage has increased by 22%, similar to the 27% increase in workers' wages and 21% inflation over the same period.
• Differences Between Firms: For single coverage, the average premium is higher for covered workers at small firms than at large firms. However, the average premiums for family coverage are comparable between small and large firms.
• Worker Contributions: Most covered workers contribute to the cost of their premiums, with covered workers at small firms contributing a higher percentage of the premium for family coverage compared to those at large firms.
• Employer Contributions: Thirty percent of covered workers at small firms are enrolled in plans where the employer pays the entire premium for single coverage, whereas only 6% of covered workers at large firms have this benefit.
• Average Contribution Amounts: The average annual dollar amounts contributed by covered workers in 2023 are similar to the amounts last year but greater than five years ago. Additionally, single and family premium contributions for covered workers in HDHP/SO plans are, on average, lower than contributions for workers in other plan types.

As healthcare costs continue to rise, understanding the impact of deductibles on workers' financial well-being becomes increasingly crucial. Unlike premiums, which have significantly increased, deductible amounts have exhibited relatively slow growth. This modest increase may stem from employer concerns about the affordability of higher out-of-pocket costs, particularly for workers with lower wages.

• Percentage with Deductibles is the Same: About 90% of workers with single coverage have a yearly deductible, which is similar to last year's percentage.
• Average Deductible Amount Stays the Same, But Rises for Employees at Smaller Companies: The average deductible amount for workers with single coverage and a yearly deductible in 2023 is $1,735, which hasn't changed much from the previous year. However, the average deductible is higher for workers at small firms compared to those at large firms ($2,434 vs. $1,478).‍
• Increasing Slowly, but Still Increasing: Among workers with single coverage and any deductible, the average deductible amount has increased by 10% over the last five years and 53% over the last ten years. This is significantly less than the increases we are seeing in premiums and shows a hesitancy in employers to move their employees to higher deductible plans.

The main differences between coverage for employees at small firms versus large firms are:

• Contribution Rates: Employees at small firms contribute a higher percentage of the premium for family coverage compared to those at large firms (38% versus 25%).
• Average Contribution Amount: The average amount contributed by covered workers at small firms is significantly higher than at large firms, with covered workers at small firms contributing an average of $8,334 compared to $5,889 for those at large firms.
• Employer Contribution: A higher percentage of covered workers at small firms (30%) are enrolled in plans where the employer pays the entire premium for single coverage, compared to only 6% at large firms.
• High Contribution Plans: However, a greater percentage of covered workers at small firms (32%) are in plans where they must contribute more than half of the premium for family coverage, compared to 8% at large firms.

Overall, while employees at small firms may have a higher average contribution and a greater likelihood of paying more for family coverage, they also have a higher chance of having the entire premium for single coverage covered by their employer.

How much did employer-sponsored health insurance premiums increase in 2023?

In 2023, premiums for single and family coverage increased by 7% compared to the previous year, reflecting rising healthcare costs. This increase outpaced both wage growth and inflation, putting pressure on employers and employees to manage healthcare expenses effectively.

What factors contributed to the rise in insurance premiums?

The rise in insurance premiums in 2023 can be attributed to various factors, including inflation-driven increases in healthcare costs, advances in medical technology leading to higher treatment expenses, and the overall complexity of the healthcare system. Economic factors such as changes in employment patterns and regulatory shifts may have also influenced premium adjustments.‍

What alternative approaches are becoming popular for cost-effective healthcare solutions?‍

Alternative approaches such as Health Reimbursement Arrangements (HRAs), level-funded plans, and stop-loss strategies are gaining popularity among businesses seeking cost-effective healthcare solutions. These approaches offer greater flexibility, customization, and control over healthcare spending compared to traditional insurance models, making them attractive options for businesses of all sizes.

‍How have deductible amounts changed over the past five years?‍

Over the last five years, the average deductible amount for employer-sponsored health insurance has increased by 10%. Workers at smaller companies tend to experience higher average deductibles than larger firms, reflecting differences in employer-sponsored benefit structures and cost-sharing arrangements.

‍What is the average contribution amount by covered workers at small and large firms?‍

Covered workers at small firms contribute an average of $8,334 towards their premiums, whereas those at large firms contribute an average of $5,889. These contributions represent a significant portion of employees' compensation and highlight the importance of evaluating healthcare benefits as part of overall compensation packages.

Our team knows the ins and outs of the health insurance marketplace and will guide you towards the solution that make the most sense for your business and your team. Come with questions! Our experts are happy to dig into the details to get you the clarity you need.

During the call, Liferaft will run a cost-benefit analysis on your company's current healthcare spending and show you different ways you can save—without sacrificing plan quality. After your consult, Liferaft will design a unique plan for your employee's health insurance, including suggested plans and accounts, plan policy documents, and the annual budget.