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Published: Oct 28, 2022 5 min read
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Health insurance premiums for America's workers are primed for a big jump in 2023 after largely plateauing this year.

For families who get health insurance through their employer, annual out-of-pocket costs for premiums ran an average of $6,106 this year, or an approximate 2% increase from $5,969 in 2021, according to a new study released Thursday by the nonprofit Kaiser Family Foundation (KFF). For singles, out-of-pocket spending on premiums rose from $1,299 in 2021 to $1,327 this year, another increase of about 2%.

Out-of-pocket costs represent only a fraction of the overall cost of premiums. Employers typically cover the majority, and workers pick up the rest. The total cost of premiums — including both shares — rose only 1% last year to an average of $22,463, according to KFF’s survey, which polled nearly 2,200 non-federal public and private employers.

All said, these increases are historically low, and they seem tiny compared to the overall inflation rate for the 12-month period ending in September, 8.2%. Unfortunately, workers can expect much bigger health insurance price hikes coming soon.

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“This could be the calm before the storm,” KFF President and CEO Drew Altman said in a news release of the study, “as recent inflation suggests that larger increases are imminent.”

Health insurance costs and inflation

This year’s modest premium increases are unusual because they trailed both overall inflation and employee wage gains, KFF says. In pre-pandemic years, the annual increase in health insurance premiums typically outpaced those factors by large margins. In 2019, for example, family premiums jumped 5% while wages rose 3.5% and annual inflation was at 1.6%.

Why did 2022 buck that trend? “Employer costs for this year were largely set last year, before inflation became a major economic concern and after the COVID-19 pandemic led to a temporary slowdown in utilization of health care services,” the report states.

Once 2023 insurance contracts are set, though, those price increases are expected to start rolling in, according to KFF. The premium hikes could affect the nearly 160 million Americans who rely on health coverage through their workplace. KFF did not estimate exactly how big it thinks premium hikes might be, but an above-average increase could be on the horizon.

“As inflation continues to grow at relatively high levels, we could potentially observe a higher increase in average premiums for 2023 than we have seen in recent years,” the report states.

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Workers at smaller firms pay more for health insurance

KFF’s findings also show that workers at small businesses — those with less than 200 employees — pay much more for their health insurance.

“The report reveals ongoing disparities in the burden of health care costs on workers at smaller and large employers,” KFF states.

On average, workers at small firms pay much more out of pocket for their premiums. For family coverage, small-firm workers pay about $7,600 annually while workers at larger firms pay approximately $5,600 — a difference of about $2,000. Workers at smaller businesses also tend to have health plans with disproportionately higher deductibles, meaning they have to pay more upfront and out of pocket before certain benefits kick in.

Similarly, premiums for small-firm workers are growing much faster than premiums for workers at large firms. KFF's report shows that since 2017, average family premiums rose 26% for small firms compared to 17% for large companies.

If premiums spike in the coming year, KFF’s findings suggest all workers will likely shell out more for their health insurance. But workers at small businesses, who are already paying more, will likely have to bear a particularly heavy burden.

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