WikiLeaks Document Release http://wikileaks.org/wiki/CRS-RS22735 February 2, 2009 Congressional Research Service Report RS22735 Spending by Employers on Health Insurance: A Data Brief Jennifer Jenson, Domestic Social Policy Division October 10, 2007 Abstract. Despite concerns about the cost of benefits, small and large employers together provide health coverage for most Americans, about 60% of the population in 2006.1 But as the amount that employers pay for health insurance has been increasing - both absolutely and as a share of labor costs - the percent of the population covered has been decreasing. To describe employer contributions for health insurance, this report presents data from two employer surveys. The first, conducted by the Kaiser Family Foundation and the Health Research and Educational Trust, provides information on premiums for employer-sponsored health insurance. The second, from the Department of Labor, provides information on employer costs for employee compensation, including costs for wages and salaries, health insurance, and other benefits. ¢ ¢ http://wikileaks.org/wiki/CRS-RS22735 Prepared for Members and Committees of Congress ¢ ¢ ¢ To attract and maintain a skilled workforce, many businesses provide health insurance and other benefits for their employees. As the cost of health insurance rises, employers face a growing challenge paying for benefits while managing labor costs to succeed in a competitive market. All types of businesses report problems, including both small businesses and firms with thousands of employees and retirees. Despite concerns about the cost of benefits, small and large employers together provide health coverage for most Americans, about 60% of the population in 2006. (U.S. Census Bureau, Income Poverty, and Health Insurance Coverage in the United States: 2006, Current Population Report no. P60-233, August 2007, p. 58.) The actual estimate for 2006 was 59.7%, down from 60.2% in 2005, and from 64.2% in 2000 (the 20-year high). But as the amount that employers pay for health insurance has been increasing--both absolutely and as a share of labor costs--the percent of the population covered has been decreasing. To describe employer contributions for health insurance, this report presents data from two http://wikileaks.org/wiki/CRS-RS22735 employer surveys. The first, conducted by the Kaiser Family Foundation and the Health Research and Educational Trust, provides information on premiums for employer-sponsored health insurance. The second, from the Department of Labor, provides information on employer costs for employee compensation, including costs for wages and salaries, health insurance, and other benefits. ¢ ¢ Premiums for Employer-Sponsored Health Insurance .................................................................... 1 Health Insurance and Labor Costs................................................................................................... 3 Figure 1. Distribution of Percentage of Premium Paid by Employers for Single and Family Health Insurance Coverage, 2005 .................................................................................... 2 Figure 2. Health Insurance as a Percentage of Total Compensation, 1991-2007 ............................ 4 Figure 3. Employer Costs per Hour Worked for Employee Compensation, 1991-2007 ................. 5 Figure 4. Growth in Employer Costs per Hour Worked for Employee Compensation, 1991-2007..................................................................................................................................... 6 http://wikileaks.org/wiki/CRS-RS22735 Table 1. Employer and Worker Contributions for Employer-Sponsored Health Insurance, 2001-2007..................................................................................................................................... 1 Table 2. Premiums for Employer-Sponsored Health Insurance, and Growth in Prices for All Goods and Services, 2001-2007............................................................................................. 2 Table 3. Wages and Salaries, Benefits, and Health Insurance as a Percentage of Total Compensation, 2001-2007 ........................................................................................................... 3 Author Contact Information ............................................................................................................ 6 ¢ ¢ ¢ Although not all employers provide work-based health coverage, those that do pay most of the premium. As shown in Table 1, in 2007, employers paid 84.5% of the cost for single coverage and 72.9% for family coverage. Employers paid a smaller share of health insurance premiums in 2007, compared with 2006. htlaeH derosnopS-reyolpmE rof snoitubirtnoC rekroW dna reyolpmE .1 elbaT 7002-1002 ,ecnarusnI 1002 2002 3002 4002 5002 6002 7002 muimerp fo erahs 'sreyolpmE ycilop elgniS %4.68 %2.58 %0.58 %9.48 %8.48 %2.58 %5.48 http://wikileaks.org/wiki/CRS-RS22735 ycilop ylimaF %5.47 %8.37 %4.37 %3.37 %1.57 %1.47 %9.27 muimerp fo erahs 'srekroW ycilop elgniS %6.31 %8.41 %0.51 %1.51 %2.51 %8.41 %5.51 ycilop ylimaF %5.52 %2.62 %6.62 %7.62 %9.42 %9.52 %1.72 dna hcraeseR htlaeH dna noitadnuoF ylimaF resiaK eht morf atad no desab snoitaluclac SRC :ecruoS 4002 ,yevruS launnA 5002 ,yevruS launnA 6002 ,yevruS launnA 7002 stifeneB htlaeH reyolpmE ,tsurT lanoitacudE .yevruS launnA 1002 dna ,yevruS launnA 2002 ,yevruS launnA 3002 ,yevruS launnA .srekrow erom ro eerht htiw sreyolpme etavirp dna cilbup fo elpmas lanoitan a no desab era ataD :etoN The above shares are average contributions by employers, but different firms pay different shares, and even the same firm may pay different shares for different workers.1 As shown in Figure 1, in 2007, employers paid 100% of the premium for health insurance for 20% of workers with single coverage and 6% of workers with family coverage. They paid 50% or less of the premium for only 2% of workers with single coverage. 1 In addition, as mentioned already, not all employers offer insurance. According to the KFF/HRET survey, in 2007, 99% of firms with 200 or more workers offered health benefits. Offer rates for smaller firms were: 45% (3-9 workers), 76% (10-24 workers), 83% (25-49 workers), and 94% (50-199 workers). %2.01 %5.5 %5.5 %3.9 %7.9 %0.41 %7.21 %2.11 amuimerp ni htworG 601,21$ 084,11$ 088,01$ 059,9$ 860,9$ 459,7$ 650,7$ muimerp latoT 182,3$ 379,2$ 317,2$ 166,2$ 214,2$ 480,2$ 008,1$ noitubirtnoc rekroW 428,8$ 805,8$ 761,8$ 982,7$ 656,6$ 078,5$ 652,5$ noitubirtnoc reyolpmE ruof fo ylimaf a rof muimerp launna egarevA %8.9 %6.5 %4.5 %9.8 %2.9 %6.01 %4.51 %4.9 amuimerp ni htworG 974,4$ 242,4$ 420,4$ 596,3$ 383,3$ 060,3$ 256,2$ muimerp latoT 496$ 726$ 016$ 855$ 805$ 454$ 063$ noitubirtnoc rekroW 587,3$ 516,3$ 314,3$ 731,3$ 578,2$ 606,2$ 292,2$ noitubirtnoc reyolpmE egarevoc elgnis rof muimerp launna egarevA 60-1002 7002 6002 5002 4002 3002 2002 1002 htworG .gvA 7002-1002 ,secivreS dna sdooG llA rof secirP ni htworG dna ,ecnarusnI htlaeH derosnopS-reyolpmE rof smuimerP .2 elbaT annual growth in consumer prices was 2.6%. rate of 9.8%; average growth for family coverage was 10.2%. Over the same period, average premiums for single coverage in an employer-sponsored health plan grew at an average annual for all goods and services, as measured by the Consumer Price Index. Over the 2001-2006 period, Growth in health insurance premiums has varied year-to-year, always exceeding growth in prices for a family of four. between 2001 and 2007, from $2,292 to $3,785 for single coverage, and from $5,256 to $8,824 in Table 2, employer payments for single and family coverage both increased by about two-thirds over the 2001-2007 period (Table 1), the average amount has increased substantially. As shown Although the average share that employers contribute for premiums has been relatively stable . yevruS launnA 7002 stifeneB htlaeH reyolpmE ,tsurT lanoitacudE http://wikileaks.org/wiki/CRS-RS22735 dna hcraeseR htlaeH dna noitadnuoF ylimaF resiaK eht morf atad no desab snoitaluclac SRC :ecruoS 5002 ,egarevoC ecnarusnI htlaeH ylimaF dna elgniS rof sreyolpmE yb diaP muimerP fo egatnecreP fo noitubirtsiD . 1 erugiF ¢ ¢ ¢ ¢ .gvA htworG 3002 2002 1002 4002 5002 6002 7002 60-1002 secivres dna sdoog lla rof secirp ni htworg egarevA U-IPC %8.2 %6.1 %3.2 %7.2 %4.3 %2.3 AN %6.2 .S.U eht morf era secirp ni htworg no ataD .)1 elbaT ees( syevrus tifeneb htlaeh reyolpme TERH/FFK :ecruoS .vog.slb.www//:ptth ta ,scitsitatS robaL fo uaeruB ,robaL fo tnemtrapeD lanoitan a no desab era ataD .elbaliava ton = AN .sremusnoC nabrU llA-xednI ecirP remusnoC = U-IPC :setoN esuaceb slatot ot dda ton yam stnenopmoC .srekrow erom ro eerht htiw sreyolpme etavirp dna cilbup fo elpmas .gnidnuor fo .raey suoiverp morf muimerp ni htworG .a Employer contributions for health insurance are an important component of labor costs. Firms use http://wikileaks.org/wiki/CRS-RS22735 health and other benefits to attract and retain workers, and workers value access to subsidized health coverage. As shown in Table 3, in March 2007, health insurance accounted for 7.9% of employee compensation; other benefits, including paid leave, pensions, and required contributions for Social Security and Medicare, accounted for 22.1%.2 Wages and salaries made up the remaining 70% of total compensation.3 dna segaW .3 elbaT latoT fo egatnecreP a sa ecnarusnI htlaeH dna ,stifeneB ,seiralaS 7002-1002 ,noitasnepmoC 1002 2002 3002 4002 5002 6002 7002 seiralas dna segaW %6.27 %4.27 %8.17 %0.17 %4.07 %1.07 %0.07 stifeneb latoT %4.72 %6.72 %2.82 %0.92 %6.92 %9.92 %0.03 ecnarusni htlaeH %1.6 %5.6 %9.6 %2.7 %5.7 %6.7 %9.7 stifeneb rehto llA %3.12 %1.12 %3.12 %8.12 %1.22 %3.22 %1.22 rof stsoC reyolpmE ,snoitidnoC gnikroW dna noitasnepmoC fo eciffO ,scitsitatS robaL fo uaeruB .S.U :ecruoS /vog.slb.www//:ptth ta ,7002-4002 dna ,3002-2002 ,1002-1991 ,gnitsiL lacirotsiH ,)CECE( noitasnepmoC eeyolpmE .mth.emoh/tce/scn hguorhT( .raey hcae fo hcraM ni detroper atad no desab era segatnecreP .srekrow nailivic rof era ataD :setoN enuJ nI ).ylretrauq dehsilbup neeb evah setamitse ,2002 ecnis ;hcraM ni yllaunna dehsilbup erew setamitse ,1002 .)atad tnecer tsom( %9.7 saw ecnarusni htlaeh rof noitasnepmoc fo erahs eht ,7002 2 In addition to the benefits listed above, the 22% share includes overtime and other supplemental pay, life and disability insurance, and required contributions for unemployment insurance and workers' compensation. 3 Data on employer costs for employee compensation are based on a national sample of different occupations in private establishments and state and local governments. Several groups are excluded from the sample for private industry: the self-employed, farm workers, and private household workers. Federal government workers are excluded from the sample for the public sector. The data measure the average cost per employee hour worked that employers pay for wages and salaries and benefits. Wages and salaries are defined as the hourly straight-time wage rate or, for workers not paid on an hourly basis, straight-time earnings divided by the corresponding hours. For more information, see BLS News, pp. 24-26 (technical notes), released September 20, 2007, at http://www.bls.gov/news.release/pdf/ecec.pdf. ¢ ¢ The 7.9% share of compensation represents average spending on health insurance for civilian workers: individual employers may devote a higher or lower share, or nothing at all. Contributions also vary by broad industry group. For example, in June 2007, spending by state and local governments on health insurance was 11.0% of total compensation, while the share for private industry was 7.1%.4 Differences in employer spending may be explained by differences in health insurance coverage rates, differences in the generosity of benefits, and differences in the other components of compensation. The 2007 share for civilian workers is high compared with the late 1990's, when employer contributions for health insurance accounted for less than 6% of compensation. As shown in Figure 2, over the 1999-2007 period, the share of spending for health insurance grew steadily, from 5.8% in 1999 to 7.9% in 2007. A previous upward trend occurred between 1991 and 1994, when spending grew from 6.1% of compensation to a peak of 7.0%, coinciding in time with President Clinton's health reform effort. Between 1994 and 1998, spending fell from 7.0% of compensation to 5.8%, in part because of growth in managed care plans that had some success in controlling health care costs. http://wikileaks.org/wiki/CRS-RS22735 2 erugiF 7002-1991 ,noitasnepmoC latoT fo egatnecreP a sa ecnarusnI htlaeH . rof stsoC reyolpmE ,snoitidnoC gnikroW dna noitasnepmoC fo eciffO ,scitsitatS robaL fo uaeruB .S.U :ecruoS /vog.slb.www//:ptth ta ,7002-4002 dna ,3002-2002 ,1002-1991 ,gnitsiL lacirotsiH ,)CECE( noitasnepmoC eeyolpmE .mth.emoh/tce/scn .raey hcae fo hcraM ni detroper atad no desab era segatnecreP .srekrow nailivic rof era ataD :setoN Growth in health insurance as a share of total compensation does not itself provide information on whether labor costs are increasing for employers. Labor costs change with changes in all of the components of compensation, including wages and salaries, health insurance, and other benefits. As shown in Figure 3, labor costs per hour worked grew from an average of $16.45 in 1991 to $27.82 in 2007. Over the same period, costs for wages and salaries grew from $11.81 to $19.47 4 BLS News, September 20, 2007, p. 3. .noitasnepmoc 'srekrow dna ,ecnarusni tnemyolpmenu ,eracideM ,ytiruceS laicoS rof snoitubirtnoc deriuqer dna ;snoisnep ;ecnarusni ytilibasid dna efil ;yap latnemelppus rehto dna emitrevo ;evael diap edulcni stifeneb rehtO .raey hcae fo hcraM ni detroper atad no desab era stnuomA .srekrow nailivic rof era ataD :setoN .mth.emoh/tce/scn /vog.slb.www//:ptth ta ,7002-4002 dna ,3002-2002 ,1002-1991 ,gnitsiL lacirotsiH ,)CECE( noitasnepmoC eeyolpmE rof stsoC reyolpmE ,snoitidnoC gnikroW dna noitasnepmoC fo eciffO ,scitsitatS robaL fo uaeruB .S.U :ecruoS http://wikileaks.org/wiki/CRS-RS22735 7002-1991 ,noitasnepmoC eeyolpmE rof dekroW ruoH rep stsoC reyolpmE . 3 erugiF worked was 3.2% for wages and salaries and 3.4% for other benefits. costs per hour was 5.0%. Over the same period, the average annual increase in costs per hour from an increase of 11.9% in 1992 to a decrease of 6.3% in 1995; the average annual increase in 1991-2007 period, the change in employer costs per hour worked for health insurance ranged Change in the components of labor costs varies year-to-year. As shown in Figure 4, over the grew from $3.63 to $6.16. per hour worked, health insurance costs grew from $1.01 to $2.19, and costs for other benefits ¢ ¢ jjenson@crs.loc.gov, 7-4453 Specialist in Health Economics Jennifer Jenson .3 erugiF eeS :setoN .)3 erugiF ees( scitsitatS robaL fo uaeruB eht morf atad no desab ,sisylana SRC :ecruoS http://wikileaks.org/wiki/CRS-RS22735 7002-1991 ,noitasnepmoC eeyolpmE rof dekroW ruoH rep stsoC reyolpmE ni htworG . 4 erugiF ¢ ¢