Midlife Workers and the Cost of Employer-Sponsored Health Insurance

Employers play a central role in health insurance coverage in the US, with the vast majority of employees working for a company that offers a group health insurance benefit. Sixty-three percent of all adults ages 50 to 64 (“midlife adults”) get their health insurance through their employer or their spouse or partner’s employer. In 2022, this amounted to 39.5 million midlife adults with employer-sponsored insurance.

Rising health care costs impact the affordability of employer-sponsored health insurance. According to KFF’s 2024 Employer Benefits Survey, total premiums for employer coverage (including both employer and employee shares) rose 7 percent each year over the past two years. Even with this already significant increase some analysts predict both premiums and out-of-pocket expenses are likely to increase at similar rates, alongside only modest growth in wages. This raises questions about how midlife workers will handle the increased costs.

Employees are paying more for health insurance

If employees felt squeezed by health care costs in recent years, it is for good reason. Over the past decade, the amount employees have paid in health insurance premiums has steadily increased. An analysis of the most recent Medical Expenditure Panel Survey (MEPS) data by the AARP Public Policy Institute and NORC at the University of Chicago (AARP/NORC) showed that the median employee contribution among midlife adults for single coverage rose from $1,039 in 2011 to $1,610 in 2021 and for family coverage from $2,546 to $3,602, both faster than the rate of inflation for that period.

In addition to premiums, most employees also face out-of-pocket health care expenses for their coverage, including deductibles, copays, and coinsurance for services. The AARP/NORC analysis showed that in 2021, 72 percent of all adult employees paid out-of-pocket health care expenses. Notably, midlife workers were more likely to face out-of-pocket costs (83 percent) with over 8 million midlife workers spending more than $1,000.

The burden of health care costs, as measured by health insurance premiums and out-of-pocket expenses, is particularly felt among midlife adults ages 50 to 64 who face higher rates of chronic conditions and are more likely to need health care services than younger adults. Not only have expenses remained consistently higher for midlife workers, relative to workers of other ages, but midlife workers have seen their total health insurance costs increase between 2011 and 2021. Over that period, median total health insurance costs for midlife adults increased 38 percent for single coverage plans and 39 percent for family plans, which are faster than the rate of inflation.

Employer coverage may be unaffordable for some midlife adults and their families

Despite having health insurance, and despite employers covering the majority of the cost of insurance premiums, some workers still may not find their coverage to be affordable. Among midlife adults with private insurance, including those with employer sponsored coverage, more than 20 percent enrolled in single coverage plans and 28 percent with family coverage plans pay premiums and out-of-pocket costs exceeding 10 percent of their gross income. This amounts to more than 5.4 million midlife workers. Moreover, close to a million midlife workers are paying 24 percent or more of their gross income on these health care expenses.

Affordability is particularly challenging for midlife workers and their families with lower incomes, as health insurance costs consume an even larger share of their wages. Midlife adults earning less than $30,000 a year spend a median of 11 percent of their annual gross incomes on health insurance costs for single plans and 19 percent of annual gross income for family plans. This is a significantly higher share than for midlife workers earning more than $83,200 a year, who spend a median of 2 percent of their annual gross income for single plans and 4 percent for family plans.

Rising health care costs may cause further strain on midlife workers

Going forward, ever-rising health care costs may put more pressure on employers to shift more costs onto workers, who are already paying high premiums and out-of-pocket costs. As a result of this growing pressure, employees may be more likely to see changes to their employer-provided coverage such as higher health insurance premiums, reduced benefits, or more limited provider networks. They may also be less likely to be offered health benefits altogether, more likely to be offered plans that shift greater risk and out-of-pocket costs onto employees (such as high-deductible health plans), or face reduced wages or smaller wage increases.

Midlife workers may find additional costs challenging. A recent survey of employees showed that, in the face of increased health care costs, many had to make tradeoffs. These include scaling back savings (e.g., reducing retirement contributions), or an inability to pay for necessities or bills. Another study found that nearly one-third of adults ages 50 to 64 with employer coverage reported skipping or delaying medical care due to cost.

Midlife adults may face challenges in 2025 and beyond

Our analysis of MEPS data and other research finds that rising health care costs are creating challenges for many of the nearly 40 million midlife adults with employer-sponsored insurance. Whether these challenges come in the form of higher premiums and out-of-pocket costs, limited plan offerings, or wage and benefit reductions, the consequences of not addressing them may be serious. Policymakers and employers should recognize that rising health care costs impact the affordability of, and access to, health care for midlife employees. They should find ways to address these rising costs to ensure midlife adults can maintain affordable health coverage and access the health care they need.