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Each week, Health Affairs' Rob Lott brings you in-depth conversations with leading researchers and influencers shaping the big ideas in health policy and the health care industry.
A Health Podyssey goes beyond the pages of the health policy journal Health Affairs to tell stories behind the research and share policy implications. Learn how academics and economists frame their research questions and journey to the intersection of health, health care, and policy. Health policy nerds rejoice! This podcast is for you.
Hello, and welcome to a health podocy. I'm your host, Rob Lott. Let's not forget how this all started. During World War two, the US government imposed wage controls to slow inflation. And so employers at the time sought other ways to attract and retain workers.
Rob Lott:For example, by boosting benefits that were not considered wages, benefits like health insurance. A decade later, the IRS confirmed that employer contributions to health care were tax deductible for the employer and could also be excluded from the employee's taxable income. From there, it was off to the races. Employer sponsored insurance grew dramatically, and decades later, it remains the keystone of the incredibly precarious, yet somehow astonishingly enduring structure that we call the American health care system today. Of course, even as this piece of the market has grown, evolved, and been adapted to over the last seventy five years, it has nevertheless been hard to track.
Rob Lott:There's tremendous variation from state to state across industries and by employers finances and outlook. Fortunately, we do have an annual nationally representative survey of private and non federal public employers, which consistently and reliably tracks trends in employer health insurance coverage and the cost of that coverage. This survey has been around a while. It was first fielded in 1987 by the Health Insurance Association, a predecessor to the group known today as AHIP. In 1991, KPMG took on this important work.
Rob Lott:And finally, in 1999, KFF, formerly known as the Kaiser Family Foundation, took it up and has been running the survey ever since. Now, along the way, health affairs has served as the annual platform for KFF to publish key peer reviewed findings and analysis from the survey. And that's why we're here today to talk about the just released results of the 2025 survey. I'm here with Matthew Ray, coauthor of this year's paper about the survey published in the November issue of Health Affairs. He is the associate director of the program on the healthcare marketplace at KFF, and I can't wait to hear all about the survey's highlights from one of the people who helped make it happen.
Rob Lott:Matthew Ray, welcome to A Health Podicy.
Matthew Rae:Thank you very much. Glad to be here.
Rob Lott:So let's start with some brief context. Maybe you can remind our listeners how significant the employer sponsored insurance market is in The United States. I think we have a sense that it's pretty big. How many people are covered by employer sponsored insurance? What proportion of The US population is that?
Rob Lott:How many employers offer it? Those kinds of details.
Matthew Rae:I mean, your lead was exactly right. It is the keystone to our health insurance system. So we've got about 154,000,000 non elderly people who receive coverage from an employer. So looking at about half of the non elderly population gets insurance through their employer through job based coverage, either as a policyholder or as a dependent on someone in their household's plan.
Rob Lott:Before we talk about this year's results, tell us about the last few years. At this time in 2020, we were in the depths of the COVID-nineteen pandemic. Now, five years later, how would you describe the changes that we've seen in employer sponsored insurance over that time?
Matthew Rae:I mean, it's interesting, right? We're in an incredibly tumultuous time in terms of changes in the health system, in the country, in the economy, but employer health center insurance has been relatively stable. So over the last five years, we see consistent levels of coverage and eligibility across job based plans. We've not seen a huge retrieve of employers from offering, coverage over the over that period. So it remains what we were talking about just a second ago about being sort of the center of coverage for many people.
Matthew Rae:It's where people go to get coverage. Now we have seen some real changes to the cost of coverage. So we saw this period of decreased utilization during the pandemic as people followed stay at home orders, and we saw less health care being delivered. As a result, employer costs grew at a slower rate. Then we saw this period of sort of massive inflation in the general economy.
Matthew Rae:Following that, we saw big increases in health insurance premiums. So for the last three years, we have seen health insurance premiums grow at 7%, 7%, and 6% as we've reported in health affairs. So those are sort I would say, modest levels of growth. They are levels of growth that sort of, are modest compared to what we saw in the early two thousands when double digit increases were the norm. But at the same time, I think they are bigger than we were seeing five or ten years ago when we're seeing sort of 35% levels of growth.
Matthew Rae:So I think that means that sort of for some employers, it raises concerns about the affordability of their plans. Other thing to always remember is that we're talking about a 6% growth off of a huge number, so it's still a lot of money.
Rob Lott:Got it. So I think you zeroed in on the 2025 number, 6%, from this year's paper. The average annual premium for family health coverage, this year reached $26,993 as you said.
Matthew Rae:I'm just being saying 27,000 just so I can get it out.
Rob Lott:Fair enough. I like that. 27,000, that's six a 6% increase from 2024. Can you give us some additional context for the result? Were you surprised when these numbers, came in?
Rob Lott:And when we look at that against the sort of backdrop of the inflation rate, what can we learn from that disparity, if you will?
Matthew Rae:I mean, so this year inflation grew 2.7% and workers' wages increased 4%. So that's not a statistically larger increase with worker, with health insurance premiums, but it's still numerically larger and I think it probably feels like a lot. But, I mean, we are kind of in a remarkable time for cost for employer sponsored health insurance. Over the last five years, so throughout the pandemic, we've seen health insurance grow at pretty much the same rate as inflation and workers' wages. This comes after you know, for year after year, we published articles that said health insurance is growing much, much faster.
Matthew Rae:And over, you know, twenty five or twenty years, health insurance premiums grew several 100%, compared to a much smaller growth rate in inflation and wages. So we are in kind of a period of slower growth. Now where that goes forward, we don't know. And I think that doesn't provide a lot of comfort to an employer or health benefit manager who is still dealing with a 6% increase this year.
Rob Lott:Fair enough. Okay, so what are some of the factors driving that rate? As you said, 6% maybe not outrageous, but still significant. What's behind it?
Matthew Rae:Well, so there's long term and short term effects that drive health insurance premiums. I mean, ultimately, health insurance premiums go up when one of two things happens. People use more services or health care prices go up. And both of those things are happening over time. When we ask employers in the survey, they tell us that they're concerned about prescription drugs leading to premiums increases over the last few years and, chronic chronic conditions and diseases.
Matthew Rae:And I think both of those things are are meaningful. Prescription drugs are actually a relatively small portion of employer health spending, about 15%, but it's still the thing that employers focus in on.
Rob Lott:Got it, okay. So, you alluded to questions of affordability. This is obviously a recurring theme these days for politicians and policymakers and it really colors people's views of their own insurance and of what their employer might be able to offer them. What does this year's survey tell us about people's experience of things like how much they're expected to contribute, deductibles, other out of pocket spending that they're sort of burdened with throughout the year?
Matthew Rae:So typically most people contribute to their health insurance in two ways. One, we have to have a contribution to enroll the plan, the premium, and then we have to pay cost sharing when we use health care services. So the share I'll take both of those in in par. The health insurance premium portion, I mean, it's going roughly the same rate for employers and employees over time. So while health care costs have gone up, health care prices go up, premiums go up, then workers and employers have sort of shared that burden.
Matthew Rae:Obviously, that could change if employers feel more cost pressure or if they're if alternatively were in a tight labor market and they want to make their benefits more attractive to to employees. In terms of the cost sharing, we saw this period of sort of rapid growth in deductibles where deductibles came sort of a predominant feature of what job based coverage looked like. And I would say that period was 2006 to 02/1718. Over the last couple of years, deductibles have grown much slower. So we have a the the average deductible is a huge amount of money.
Matthew Rae:So on average, for single coverage, the average deductible is $1,800 or something thereabouts, which obviously, if you have dependents and you can end up with a lot of money out of pocket, before your plan is going to pay more services. And many Americans, even employed Americans, even Americans with employer sponsored coverage don't have that level of, financial assets to meet sort of standard deductibles. Same time, it's growing slower. And when we talk to employers, I think that the general thought is they're worried about the affordability of their plans, particularly for low wage workers. We there's a question in the survey this year that we asked them what their most elements of their plan they're most concerned about.
Matthew Rae:I was expecting to see prior authorization to be much higher. It wasn't. It was affordability of plans. And I think it gets at the fact that they spent all of this money on health insurance and they want it to be a benefit to their employees and they feel like many of them can't afford to use the plans that they've that they're they're now sponsoring.
Rob Lott:Got it. Okay. Of course, not all plans are the same. Not all employers are the same. Not all employees are the same as well.
Rob Lott:What, was some of the the most notable variation that you found in your findings when you sort of drilled down a little deeper beyond that kind of top line numbers?
Matthew Rae:No. Absolutely. What job based coverage looks very different across the country, across firms, What your employer looks like and how engaged they are in their human resources functions can make a big difference in what your health benefits look like. So, I mean, the thing that always kinda jumps out is for the challenges for smaller firms. So coverage looks very different.
Matthew Rae:One, it's typically a lot more expensive to enroll in family coverage if you work for a small employer. So about a quarter of covered workers at small employers have to chip in more than $12,000 a year, which is just a massive amount of money to enroll in family coverage. They're also much more likely to face much larger deductibles, and your small firms are much much less likely to offer coverage to begin with. So the story for job based coverage is a lot weaker sort of in that that area. Also, firms with many low wage workers typically have much more challenges offering coverage, and that coverage tends to be more expensive.
Matthew Rae:So these are kind of two places where it's sort of I wouldn't say the system is where the system has more strain.
Rob Lott:Some of these trends like smaller firms having a hard time offering coverage or as generous coverage, That's been around for a little while. I think people have had a sense of that over the years. Do you have a picture of if that's changing? Is it getting better? Is it getting from is it going from bad to worse?
Rob Lott:What's kind of your sense of that dynamic and how it's changed over the last few years?
Matthew Rae:I mean, the two things that are kind of happening for smaller firms is two kind of wonky ideas. But if there's a wonky place there's a place to give a wonky idea, so I think it's here.
Rob Lott:That's right.
Matthew Rae:Go for it. Is this the the rise of level funded plans and the rise of ICRA. So a level funded plan is a self funded plan, so it's not an insured product, but the employer bears a risk. But there's a stop loss coverage, which means that the insurer the the firm can purchase insurance for high cost claimants. What this ends up looking like is a lot like an insured product, but the small firm is no longer in the small group market.
Matthew Rae:And what that means is their premiums are then based upon the health status of their employees and not based upon the community rating rules that the ACA introduced. So that's very complicated, but it has really big impacts on the health insurance market because it means the healthier small firms potentially can get lower premiums by getting a level funded plan, becoming self funded, and they leave the risk pool increasing premiums for other. So I think that we have saw this sort of rapid growth over the last five years in level funded plans. We're, I think, well over half now. It's reported in the article Mhmm.
Matthew Rae:That small firms are now level funded, which means that there could be impacts on the premiums with the firms that are left in the small group market.
Rob Lott:It's sort of a a a big, sort of a system wide adverse selection if if the sort of smaller firms are kind of finding their way out, the people who are left are increasingly, under the gun. Is that a fair
Matthew Rae:way Exactly to look at right. And I think that that's happening faster in some places than others, and it could put a strain on sort of small employers with, sicker risk pool, sicker people, higher cost claimants, on finding affordable coverage.
Rob Lott:Okay. Then you also mentioned, I'm going get the acronym wrong, ICRA as part of allowing your employees to purchase on the marketplace. Is that a well, you say more.
Matthew Rae:Yeah. So exactly. This is an idea from the first Trump administration in which your employer can, rather than sponsoring their traditional group's health plan where everybody enrolls in the PPO plan that firm sponsors, they give you cash and you go purchase, you know, a marketplace plan or other coverage, on the health insurance exchanges. Now this is an idea that there has been a lot of excitement in Washington and a lot of excitement about. What we found in the survey has not yet taken off.
Matthew Rae:I mean, we're still small numbers of firms are doing this, but it has potentials to change the small group market. If you've got if you are one of these employers with a sicker population, potentially, you can just give up on offering health benefits altogether, let people go purchase their own coverage, which has sort of a whole bunch of consequences for what employer coverage looks like, especially at small firms.
Rob Lott:Great. Well, in just a moment, I wanna ask you about some of the additional details from the survey's findings. But first, let's take a quick break. And we're back. I'm here talking with Matthew Ray about the KFF survey evaluating health benefits in 2025.
Rob Lott:You talked about some of the variation between small firms and large firms. I did notice in the paper also that you home in on the question of how employers are approaching GLP-1s specifically. These are the weight loss drugs, essentially, that have grown dramatically in the last year or two. What was your main finding in that regard? And what does that tell us about how employers and insurers might be addressing other promising but potentially costly new therapies or technologies more generally?
Matthew Rae:Yeah. I mean, if you wanna get a bunch of HR professionals really excited, this is the topic you bring up. Obviously, top of mind for anybody running a health plan right now. I mean, partially because this tens of millions of people with job based coverage have a BMI, which would qualify them for a GLP one. So it's actually a real place that things are changing right now.
Matthew Rae:So I think this was a topic of mind for HR professionals. What we found the big number in my mind, one of biggest numbers from the survey is the largest firms, 5,000 or more workers. They employ about 40% of American covered people who get job based coverage. They saw a big increase in the share of them that were covering GLP ones for weight loss, went from a 28% to 43%. So, I mean, a lot of people now have access, through their employer.
Matthew Rae:Same time, that's what we fielded the survey between January and July. We spent a big chunk of the summer going around the country, talking to employers about their health benefit plans and, things are really moving here. I think a lot of employers, as we reported in the survey, were shocked by how much they were spending. They were spending more than they expected, and GLP ones was making up a bigger portion of what their Rx spending than they had anticipated. Both of those are in the survey.
Matthew Rae:From these discussions, it sounded like a lot of employers were rethinking of their coverage for 2020 And I think what that means is, requiring a higher BMI threshold in order to enroll, having more case management, more utilization management. You've got to meet with a clinician before you get coverage. You've to do so many steps before you get coverage, or just giving up on coverage altogether. So it sounds like this might be a retrenchment a little bit, but it's kind of the other way as well. I mean, I think many employers at same time are thinking, look at all these new conditions that GLP ones are treating, and we want to provide health value and benefits to our employees, this is something that employees care about.
Matthew Rae:So I think that might be a retreat in 2026, and who knows as we go forward? Obviously, the missing piece here is how much these drugs cost. And when they came on the market, they were astronomically expensive. There's clearly cheaper options direct to consumer now. As prices change, employers are gonna have to continue to reassess what they're doing with these drugs.
Rob Lott:I think this is a a good example. I'm I'm no economist. Correct me if I'm wrong here, but a sort of the the wrong pocket problem where the drugs are expensive to begin with, but the cost savings from improved health accrue over a much longer term. Do you have a sense of whether or not employers are kind of making that calculation? Are they having those kind of big picture conversations?
Rob Lott:Or is it really just about what's the bottom line, how much we're spending and what do we have to do in order to retain employees?
Matthew Rae:Yeah. Both. Yes. Both. Employers are definitely evaluating their claims and being like, is this making an impact on our overall spending?
Matthew Rae:From the employers we talked to, so not a scientific, vigorous, peer reviewed analysis, employers employers felt very strongly both ways that it was making impact on their health claims and it wasn't. I mean, I have seen some evidence, kind of suggesting that there's less impact on claims than than employers may hope, but I I don't think I mean, I have not seen the a thorough analysis here yet. I think it was still kind of a moving target. I think also employers do offer health insurance because they want to recruit and retain people. I mean, we reported in the article about how important these drugs are for employee satisfaction with the plans.
Matthew Rae:Even employers who don't offer GLP ones for weight loss tell us that's really important for employee satisfaction with the plans. Makes you feel like, as an HR professional, what you want to do is you want to offer I mean, you want to work for a firm. You want to offer coverage that people like. What you don't want is people knocking on your door, upset that you're not covering their drug. So that's what you're trying to avoid.
Matthew Rae:So I mean, it's going to be a moving target as we figure all this out.
Rob Lott:Okay, fair enough. I did wanna ask about sort of the the current day conversations and politics. Obviously, the affordable care marketplaces are different from employer sponsored insurance, but a big piece of the sort of the current debate over the government shutdown is whether or not to extend the marketplace subsidies. I'm wondering if that conversation is sort of spilling over into conversations among employers and insurers about affordability, sort of the long term viability of our health insurance system writ large. I know obviously the survey was fielded before all this went down and the HR1 and everything, over the last couple of months.
Rob Lott:But do you have an inkling of how these two pieces might relate to each other?
Matthew Rae:So there's a couple of things happening. One, the fact that the focus is on the marketplace as in Medicaid is partially because employer coverage has been so stable for many. There there isn't the sort of same term result in from that we see in those other policy debates. Many people see the cost increase in employers, especially health insurance as sort of a looming crisis. But the fact of the matter is that it does remain very largely stable.
Matthew Rae:We see sort of year over year prices increases, and many people are like, this can't be sustainable. But the fact of this is that for many employer coverage remains relatively robust, covers a lot of services. Most lots of doctors are included in job based plans. So there isn't sort of, precipitous crisis right now in job employer coverage. Now what's happening in Medicaid and the Affordable Care Act sort of only sedentally affects employers.
Matthew Rae:Obviously, to qualify for marketplace coverage where marketplace subsidies at least, you can't have an affordable job offer. So in many ways, it's those who are left out from the employer system. I mean, obviously, part time workers, who are much less likely to be offered job based coverage, only half of them are covered by an employer plan versus 80% of full time workers. This this is a big deal for small business owners. The marketplace is are a big deal in terms of providing coverage.
Matthew Rae:Now in turn so for those reasons, there's probably less spillover. I don't think this is top of mind as some of the other sort of pressing issues of cell and gene therapies, new drugs, are for employers.
Rob Lott:Got it. Okay. Well, I'm wondering before we wrap up, there are any other key findings that we haven't yet mentioned, which you'd like to highlight for our listeners?
Matthew Rae:I mean, I think kind of an ongoing and interesting thing is that many people envision employers as playing this role in our system as purchasers and that prices are too high and, we need to pay for better quality and pay for better value and employers have this role as being purchasers and they can exert all this leverage. I mean, it's something that we are always looking at is how employers are I mean, if you're going do that, you're to do it through changing your provider networks. And, we find relatively small portions of employers doing sort of more alternative methods of network configuration. I think in the article we report about direct primary care or, we also have stuff about directly contracting with the hospital and avoiding the insurer altogether and paying up presumably for higher higher quality or, lower cost services. We see relatively small shares of do of employers doing those doing those things, which I think is a product for a lot of things, market consolidate cons consolidation in some places.
Matthew Rae:I mean, the other way in which employers can be purchasers and kinda get their head around prices is through price the price transparency rules. We find that lots this is the Trump first Trump administration's idea of having insurers and payers list their prices, the transparency and coverage provisions. And if we have prices were more apparent to the market, people would be better shoppers, and it would have a downward effect on prices. Now the actual effects of that are still we're still sorting it out, and we're still I think lots of us are still trying to figure out how how we can use the data and for what. We find relatively few employers tell us they're using that data, and even fewer say that their, like, employees are, take advantage of all the cost information that's available to them.
Rob Lott:Sure. So more to be seen there. I know in the pages of ElfaVerse, just in the last six months or so have we started to publish pieces, research articles using some of that data. So perhaps it's a test case or a model of how those numbers might be used, but how it translates to employers, payers, etcetera, I guess, is yet to be seen. Great.
Rob Lott:Anything else you want to plug about your work and the survey?
Matthew Rae:So obviously, there's a full report that gets into two twenty five pages of graphs, looking at all the details of employer plans. But this year, we're fortunate to have these focus groups on ICRA as well as on GLP-1s. We're doing more on, primary access to primary care with our partnership with the Petersen Kaiser Health System Tracker. All of that's available at the Petersen Kaiser Health System Tracker website as well.
Rob Lott:Well, Matthew Ray, thank you so much for taking the time to chat with us. Thank you for your ongoing work on this survey every year. I know it's a pleasure for my colleagues at Health Affairs to continue this collaboration with you and your colleagues at KFF on this work. Thank you again for taking the time to chat with us.
Matthew Rae:Thank you so much. Really appreciate the opportunity.
Rob Lott:Absolutely. And to our listeners, thanks for tuning in. If you enjoyed this episode, please tell a friend, subscribe, and tune in next week. Thanks, everyone.
Matthew Rae:Thanks for listening. If you enjoyed today's episode, I hope you'll tell a friend about a health policy.