Pennsylvania workers spend larger cut of income on employer-sponsored health benefits, new report shows

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The cost of health insurance is rising across the board, even among people who get their coverage through an employer, new data shows.

Workers in states like Pennsylvania are spending a higher percentage of their paychecks for employer-sponsored health insurance than in previous years, according to a new report published Wednesday by The Commonwealth Fund.

A Pennsylvania resident with single-person coverage paid on average more than $4,000 total in premium contributions and annual deductible costs in 2024, the data shows, which represented about 9.5% of the state’s annual median household income.

“If you just think about it, one out of every $10 that you have in your pocket today could potentially be going to health care over the course of the year,” said David Radley, senior scientist at The Commonwealth Fund’s Tracking Health System Performance initiative.

Those costs were up 27% from the prior year and an increase from where costs were several years ago in 2020, according to the report.

For families, the amount they paid in premiums and deductibles for their employer-sponsored health insurance plans was even greater, reaching more than $10,000 a year.

“At that level, for some families, [it] forces them to make tough decisions,” Radley said. “Even if they have health insurance coverage, they may be thinking twice, ‘Should I really go to the doctor if I’m not feeling well? Should I get this particular test? You know, should I fill this prescription?’”

Experts say rising insurance costs for businesses and their employees is a consequence of growing health care spending trends nationally, which involve how often people use services and how much they pay for them.

All of that, Radley said, can be driven by hospital consolidation that increases prices for medical services, ongoing health care labor shortages, inflation in the cost of supplies, high utilization of pricey medications like GLP-1 drugs and more.

“Ultimately, I think you have to tackle both price and utilization if we want to sort of rein in overall spending,” he said. “And that’s really hard to do, because we don’t want to be in a position where we limit access to things that are really beneficial for people. We don’t want to have to ration care in that way. That’s not what our system is about.”

Challenges for businesses in providing health benefits

The Commonwealth Fund report is the latest analysis in a long series of research looking at the affordability of employer-sponsored health insurance. A majority of Americans under 65 — an estimated 167 million people — get health coverage through work.

Health benefits are considered a top factor and consideration among job seekers, national polling and surveys show.

In many cases, businesses and companies take on a larger share of the premium costs so that employees are left paying a smaller share or nothing at all. They may also offer several plan options at different price points and deductible amounts for workers to choose from, depending on their health care needs.

However, providing health benefits has become more challenging for businesses in recent years, said Neal Lesher, director of government at Pennsylvania Chamber of Business and Industry.

He said that’s especially true for small businesses, many of which purchase group plans through Affordable Care Act marketplaces.

“And you saw 20% increases there,” Lesher said. “It’s very hard for a small business to absorb a 20% increase and still make a profit, so they’ve got to find either elsewhere to make reductions or unfortunately, and I think for the vast majority of businesses, the last resort is to also ask their employees to share in some of that increase.”

Alternative approaches to employer-sponsored health coverage

Rising health costs are forcing businesses to get creative, Lesher said. Most want to remain attractive and competitive to job seekers who value health insurance coverage and benefits with new employment.

Some companies are opting into federal programs that allow employers through tax incentives to give workers money toward purchasing an individual plan on the ACA, or to form health insurance consortiums with other businesses and their employees, Lesher said.

Other companies are exploring direct care models “where they’re actually bringing a physician into their workplace to provide direct care to their employees,” he said. “It’s not going to replace health care insurance, but it provides easy access for general primary care.”

Despite the increasing challenges to purchasing and providing traditional health benefits, Lesher said there are a lot of different options available that businesses and entrepreneurs can look at.

“It’s a matter of finding the best fit for their company,” he said.