Spending by Employers on Health Insurance: A Data Brief

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

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
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
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.

Table 1. Employer and Worker Contributions for Employer-Sponsored Health
Insurance, 2001-2007
²⁰⁰¹²⁰⁰^{2 200}³²⁰⁰^{4 200}^{5 200}^{6 200}⁷
^{Employers’ share}^{of p}^remium
^Single^policy^86.4%^{85.2% 85.0%}^{84.9% 84.8% 85.2% 84.5%}
^Family^policy^74.5%^{73.8% 73.4%}^{73.3% 75.1% 74.1% 72.9%}
^{Workers’ sha}^{re of}^premium
^Single^policy^13.6%^{14.8% 15.0%}^{15.1% 15.2% 14.8% 15.5%}
^Family^policy^25.5%^{26.2% 26.6%}^{26.7% 24.9% 25.9% 27.1%}
^Source:^{CRS calculations based}^{on data from the Kaiser Family F}^{oundation and Health Resea}^{rch a}^nd
^{Educational Trust,}^{Employer Healt}^{h Benefits 2007 Annual S}^{urvey, 20}^{06 Annual Su}^{rvey, 2005 Annu}^{al Su}^r^{vey, 2004}
^{Annual Su}^{rvey, 2003 Annu}^{al Su}^rvey,^{2002 Annual Su}^{rvey, and 2001 An}^{nual Su}^rvey^.
^Note:^{Data are based on a national sample of p}^{ublic and}^{private e}^{mployers with th}^{ree or more}^workers.
The above shares are average contributions by employers, but different firms pay different shares, ¹
and even the same firm may pay different shares for different workers. 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^addⁱ^tⁱ^oⁿ^,^{as m}^eⁿ^tⁱ^oⁿ^e^d^al^read^y,ⁿ^o^t^al^l^em^p^l^o^y^{ers o}^{ffer i}ⁿ^su^ran^ce.^A^c^co^rdⁱⁿ^{g t}^o^t^h^{e K}^F^F^/^HRE^T^su^rve^y^,ⁱⁿ²⁰⁰⁷^,
^99%^of^fⁱ^r^m^s^w^{ith 20}⁰^or^m^o^r^e^w^o^r^k^e^r^s^of^f^e^r^e^{d he}^a^{lth be}^ne^f^{its. Offer rates f}^o^r^s^m^aller^fⁱ^r^m^s^{were: 4}⁵^%⁽³^-9^w^o^rk^ers),
^76%⁽¹^0-²⁴^w^o^r^k^e^r^s⁾^{, 83%}⁽²^5-⁴⁹^w^o^r^k^e^r^s⁾^{, a}^{nd 9}⁴^%⁽^50-¹⁹^{9 w}^o^r^k^e^r^s⁾^.

Figure 1. Distribution of Percentage of Premium Paid by Employers for Single and
Family Health Insurance Coverage, 2005
^Source:^{CRS calculations based}^{on data from the Kaiser Family F}^{oundation and Health Resea}^{rch a}^nd
^{Educational Trust,}^{Employer Healt}^{h Benefits 2007 Annual S}^urvey^.
Although the average share that employers contribute for premiums has been relatively stable
over the 2001-2007 period (Table 1), the average amount has increased substantially. As shown
in Table 2, employer payments for single and family coverage both increased by about two-thirds
between 2001 and 2007, from $2,292 to $3,785 for single coverage, and from $5,256 to $8,824
for a family of four.
Growth in health insurance premiums has varied year-to-year, always exceeding growth in prices
for all goods and services, as measured by the Consumer Price Index. Over the 2001-2006 period,
premiums for single coverage in an employer-sponsored health plan grew at an average annual
rate of 9.8%; average growth for family coverage was 10.2%. Over the same period, average
annual growth in consumer prices was 2.6%.
Table 2. Premiums for Employer-Sponsored Health Insurance, and Growth in Prices
for All Goods and Services, 2001-2007
^Avg.
^Growth
²⁰⁰^{1 200}^{2 200}^{3 200}⁴²⁰⁰⁵²⁰⁰⁶²⁰⁰⁷²⁰⁰^1-06
^{Average ann}^{ual premium}^for^{single coverage}
^Employer^cont^ribution^$2,29^{2 $2,60}^{6 $2,87}^{5 $3,13}⁷^$3,41³^$3,61⁵^$3,78⁵
^Worker^contribu^tion^$36^{0 $45}^{4 $50}^{8 $55}⁸^$61⁰^$62⁷^$69⁴
^Total^premium^$2,65^{2 $3,06}^{0 $3,38}^{3 $3,69}⁵^$4,02⁴^$4,24²^$4,47⁹
^{Growth in}^premiu^m^a^{9.4% 15.4% 10.6%}^9.2%^8.9%^5.4%^5.6%^9.8%
^{Average ann}^{ual premium}^for^{a family of}^fo^ur
^Employer^cont^ribution^$5,25^{6 $5,87}^{0 $6,65}^{6 $7,28}⁹^$8,16⁷^$8,50⁸^$8,82⁴
^Worker^contribu^tion^$1,80^{0 $2,08}^{4 $2,41}^{2 $2,66}¹^$2,71³^$2,97³^$3,28¹
^Total^premium^$7,05^{6 $7,95}^{4 $9,06}^{8 $9,95}⁰^$10,8⁸⁰^$11,4⁸⁰^$12,1⁰⁶
^{Growth in}^premiu^m^a^{11.2% 12.7% 14.0%}^9.7%^9.3%^5.5%^5.5%^10.2%

^Avg.
^Growth
²⁰⁰^{1 200}^{2 200}^{3 200}⁴²⁰⁰⁵²⁰⁰⁶²⁰⁰⁷²⁰⁰^1-06
^{Average gr}^{owth in p}^{rices f}^or^{all goods}^{and services}
^CPI-U^{2.8% 1.6% 2.3% 2.7%}^3.4%^3.2%^NA^2.6%
^Source:^{KFF/HRET employer}^he^{alth bene}^{fit surv}^{eys (see}^Ta^{ble 1}^{). Data on growth in prices a}^{re fr}^{om the U.S.}
^Department^{of Labor, Bur}^{eau of}^{Labor Statistics, at http://www.bls.gov.}
^Notes:^{CPI-U = Consumer Price Index-All Urban}^Consume^{rs. N}^A^{= not available. Data are based}^{on a national}
^{sample of p}^{ublic and p}^{rivate empl}^{oyers with th}^{ree or more worke}^{rs. Components}^{may not add to t}^{otals because}
^{of rounding.}
^a.^{Growth in}^premiu^{m from}^{previous year.}

Employer contributions for health insurance are an important component of labor costs. Firms use
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 ²
contributions for Social Security and Medicare, accounted for 22.1%. Wages and salaries made ³
up the remaining 70% of total compensation.
Table 3. Wages and Salaries, Benefits, and Health Insurance as a Percentage of Total
Compensation, 2001-2007
²⁰⁰^{1 200}^{2 200}³²⁰⁰^{4 200}^{5 200}⁶²⁰⁰⁷
^Wages^and^salaries^{72.6% 72.4% 71.8%}^{71.0% 70.4% 70.1%}^70.0%
^Total^benefits^{27.4% 27.6% 28.2%}^{29.0% 29.6% 29.9%}^30.0%
^Health^insu^rance^{6.1% 6.5% 6.9%}^{7.2% 7.5% 7.6%}^7.9%
^All^other^benefits^{21.3% 21.1% 21.3%}^{21.8% 22.1% 22.3%}^22.1%
^Source:^{U.S. Bureau of La}^{bor Statistics, Office of Compensation}^{and Working Conditions,}^{Employer Costs for}
^{Employee Co}^{mpensation (ECEC), Historical Listing, 1991-2001, 2002-2003, and 2004-2007}^{, at http://www.bls.gov/}
^ncs/^{ect/home.htm.}
^Notes:^{Data are for civil}^{ian workers. Percentages}^are^{based on d}^{ata reported in}^Marc^{h of each}^ye^{ar. (Through}
²⁰⁰^{1, estimates wer}^{e p}^{ublished a}^{nnually in}^March;^since²⁰^{02, esti}^{mates have}^bee^{n p}^{ublished q}^uart^{erly.) In Ju}^ne
²⁰⁰^{7, the}^share^{of compe}^nsation^{for health ins}^ura^{nce was}^{7.9% (m}^{ost recent data).}

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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 ⁴
private industry was 7.1%. 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.
Figure 2. Health Insurance as a Percentage of Total Compensation, 1991-2007
^Source:^{U.S. Bureau of La}^{bor Statistics, Office of Compensation}^{and Working Conditions,}^{Employer Costs for}
^{Employee Co}^{mpensation (ECEC), Historical Listing, 1991-2001, 2002-2003, and 2004-2007}^{, at}^{http://www.bls.gov/}
^ncs/^{ect/home.htm.}
^Notes:^{Data are for civil}^{ian workers. Percentages}^are^{based on d}^{ata reported in}^Marc^{h of each}^ye^ar.
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^BL^S^News^{, Se}^pte^m^be^r^{20, 2}⁰⁰⁷^,^{p. 3}^.

per hour worked, health insurance costs grew from $1.01 to $2.19, and costs for other benefits
grew from $3.63 to $6.16.
Change in the components of labor costs varies year-to-year. As shown in Figure 4, over the
1991-2007 period, the change in employer costs per hour worked for health insurance ranged
from an increase of 11.9% in 1992 to a decrease of 6.3% in 1995; the average annual increase in
costs per hour was 5.0%. Over the same period, the average annual increase in costs per hour
worked was 3.2% for wages and salaries and 3.4% for other benefits.
Figure 3. Employer Costs per Hour Worked for Employee Compensation, 1991-2007
^Source:^{U.S. Bureau of La}^{bor Statistics, Office of Compensation}^{and Working Conditions,}^{Employer Costs for}
^{Employee Co}^{mpensation (ECEC), Historical Listing, 1991-2001, 2002-2003, and 2004-2007}^{, at}^{http://www.bls.gov/}
^ncs/^{ect/home.htm.}
^Notes:^{Data are for civil}^{ian workers. Amounts a}^{re ba}^{sed on data}^{reported in}^Marc^{h of each}^year.^Other
^{benefits incl}^{ude paid leave; overtime and other}^su^pplemen^{tal pay; life and disability insurance;}^pensi^{ons; and}
^{required cont}^ributions^{for Social}^{Security, Medicare, unem}^{ployment insu}^{rance, a}^{nd workers’ comp}^ensation.

Figure 4. Growth in Employer Costs per Hour Worked for Employee Compensation,
1991-2007
^Source:^{CRS analysis, based on}^{data from the Bu}^{reau of}^{Labor St}^{atistics (see}^{Figure 3}^).
^Notes:^See^F^{igure 3}^.
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