Employers Face Rising Health Insurance Premiums

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Employers Face Rising Health Insurance Premiums

Sep 28, 2011

by Gregory S. Dowell

The September 27, 2011 edition of the New York Times reported that the average family premium for an employer-sponsored health care plan is up 9% this year, to more than $15,000, according to a survey of both large and small businesses by the Kaiser Family Foundation. Of the $15,073 in average premiums paid for family coverage, Kaiser found that employees paid $4,129 towards the cost, in addition to whatever out-of-pocket costs they shouldered. Reed Abelson reported on the topic in an article titled “Health Insurance Costs Rising Sharply This Year, Study Shows”. Abelson reported that “The cost of health insurance for many Americans this year climbed more sharply than in previous years, outstripping any growth in workers’ wages and adding more uncertainty about the pace of rising medical costs”.

A troubling aspect is that the large increase in premiums follows a few years of relatively moderate increases in the 5% range. Unfortunately, experts feel that more bad news may be on the way. “The open question is whether that’s a one-time spike or the start of a period of higher increases,” said Drew Altman, the chief executive of the Kaiser foundation. Needless to say, the increase in health insurance premiums and the continued uncertainty about the future come at a time when the economy continues to struggle, portfolios have been made dizzy by the gyrations of the stock market, and unemployment is around 9% (although the real unemployment rate may be much higher). The article reports that health insurance premiums are up more than 100% since 2001, when a family could expect to pay about $7,000 for health insurance coverage. As a comparison, however, from 2001 to 2010 wages have only grown by about 34%.

Some analysts speculate that the new federal health care law pushed by President Obama has contributed to the increase. Those analysts believe that insurers have raised prices in anticipation of new rules coming in 2012 that would require them to justify an increase of more than 10 percent. In addition, some of the law’s provisions that are already in effect, including coverage for adult children up to 26 years of age and preventative services like mammogram screening, have contributed to higher expenses for some employers.

Insurance companies argue that they need to get ahead of the expense curve. While actual medical expenses have been blunted by the poor economy, insurers anticipate that their expenses will rise in the future as the economy recovers and people gain confidence that they can afford medical care, at which time they will return to their doctors and maybe even have treatments that they have been putting off for the last few years. Many speculate that the demand for medical services has also been weakened due to the fact that employers have been forced to make workers pay an increasingly larger share of their medical expenses, via higher deductibles and increased co-payments. The changes in insurance coverage mean that about 75% of workers now pay at least part of the bill when they go see a doctor. Roughly one in three workers has a deductible of at least $1,000 if they have single coverage, up from just one in 10 in 2006, according to the Kaiser study.

It’s easy to feel helpless in the face of rising health insurance premiums. However, there are some steps an employer can take to try to keep costs under control:

Work with your agent to see what modifications can be made to your policy to reduce costs. Perhaps some combination of higher deductibles, different drug plans, or allocating more of the expense to employees will temper the increase.
Encourage wellness at the company. Some companies subsidize the cost of health club memberships; some companies take it a step further and reward employees who actually use their health clubs on a regular basis. Small things can help to set the tone as well. Changing the snacks available in the office to healthy options, encouraging exercise breaks during the day, or bringing in nutritionists for seminars can help to change people’s habits.
Consider a health savings plan (HSA) or a health reimbursement plan (HRA). The HSA works much like a 401k plan for health care, as the employer makes annual contributions to the employee’s account. The HRA gives the employer more control by effectively self-insuring part of the insurance costs.

None of these are magic bullets, but at least employers can begin to feel like they are not completely in the control of the insurance companies. The worse thing to do is to ignore the situation; insurance companies will not offer a special award or prize for those employers who choose to do nothing to offset the cost of rising health insurance.

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by Gregory S. Dowell Updated May 16, 2023 Spring is the traditional kick-off to wedding season, and thoughts quickly turn to the wedding venue, gifts, the happy couple, and, of course, the guest list. Lurking somewhere in the shadows, behind even that strange uncle you barely know, is another guest that needs to be considered: The tax impact on the newlyweds. To start, newlyweds will have two options for filing their income taxes in the year of marriage: Filing status can either be married filing jointly, or married filing separately. In the vast majority of cases, a couple will benefit with a lower overall tax burden to the couple by choosing to file married filing jointly. One of the classic cases where a couple may consider filing separately is when one spouse has significant amounts of medical expenses for the year. 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As this article explains, from the federal income tax standpoint, some individuals marrying next year may come out ahead by either deferring or accelerating income, depending on their circumstances. Others may find it to their advantage to defer a year-end marriage until next year. For some quick background, a “marriage penalty” exists whenever the tax on a couple’s joint return is more than the combined taxes each spouse would pay if they weren’t married and each filed a single or head of household income tax return. Before President Trump’s TCJA, only the 10% and 15% married filing jointly brackets were set at twice that of the singles bracket, and so the marriage penalty effect on joint filers applied in the brackets above the 15% bracket. Beginning with the 2018 tax year, however, the TCJA set the statutory tax brackets for marrieds filing jointly-through the 32% bracket-at twice the amount of the corresponding tax brackets for singles. As a result, the TCJA eliminated any tax-bracket-generated marriage penalty effect for joint filers where each spouse has roughly the same amount of taxable income-through the 32% bracket. For example, if two individuals who each have $215,950 of taxable income file as single taxpayers for 2022, each would have a tax bill of $49,335.50, for a combined total of $98,671. If they were married, their tax bill as marrieds filing jointly would be $98,671, exactly the same amount as the combined total tax they’d pay as single taxpayers. Because the 35% bracket for marrieds filing jointly isn’t twice the amount of the singles 35% bracket, the marriage penalty effect will still apply to joint filers whose income falls in the 35% bracket. Using 2022 tax tables, two single taxpayers may each have $500,000 in taxable income, for a combined total of $1,000,000, without having any of it taxed higher than 35%. 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The bonus is the result of two factors: 1) the tax brackets for marrieds filing jointly cover wider spans of income than the tax brackets for taxpayers as singles; and 2) the taxable income of the lower-earning individual may not push the couple’s combined income into a higher tax bracket. In such a case, it will probably be better from the tax standpoint to accelerate the marriage into this year if feasible. There are a number of other factors that should also be taken into account when determining the effect of a marriage on income taxes of the couple. As mentioned early in this post, the first decision is to verify that filing a joint return is preferred to filing separate returns. In addition, many provisions of the tax code phase out completely (or decrease partially) as adjusted gross income increases. In a perfect world, there would only be good surprises for a newlywed couple following their wedding. To avoid any unpleasant income tax surprises, we always recommend that a newlywed couple take the time to make a projection of what their income will look like when combined as a couple, and determine what the tax bill will look like, at the Federal and State levels. After all, planning ahead, communicating with each other, discussing finances, and avoiding unpleasant surprises are some of the keys to a long marriage.