'Striking change' in employer-sponsored health care premiums

The days of double-digit health insurance premium increases seem to be behind us, according to a study released today by the Kaiser Family Foundation and the Health Research & Educational Trust.

Two major trends are continuing: a slower rate of premium increases and a greater use of high-deductible health plans, especially among small employers, the study found.

Specifically, average annual premiums for employer-sponsored family coverage increased 3% from last year.

“That’s a pretty striking change” from the early 2000s, when premium increases soared into double digits, Drew Altman, CEO of the Kaiser Family Foundation, observed. “You can see the direction, and it’s pretty remarkable. The picture is one of long-term moderation and stability in the group market of employer health insurance coverage, including since the passage of the Affordable Care Act.”

He added, “We’re seeing premiums rise at about the same rate as general inflation and wages. The debate continues among experts on the reasons for the overall slowdown. There is consensus that it’s partly the result of the economy slowing down utilization and partly due to changes to the health care system.”

The average premium in a group plan was $16,834 for family coverage and $6,025 for single coverage this year, up slightly from $16,351 and $5,884, respectively, last year. On average, employers contributed 82% of the premium for single coverage and 71% of the premium for family coverage this year, the survey showed.

The offer rate has slowly declined in the past 15 years. Fifty-five percent of all firms provided health benefits to their employees this year, down from 66% in 1999, the survey found.

Rising deductibles

While PPOs remain the dominant form of health benefits, high-deductible health plans continue to gain traction. At least 27% of employers offered a high-deductible health plan this year. The percentage of employees enrolled in a plan with a deductible of $2,000 or more increased from 15% last year to 18% this year, according to the survey.

“We’ve seen a plateauing of [enrollment in] consumer-directed health plans,” which are high-deductible plans linked to a health savings account or a health reimbursement account, Altman said. However, there’s been “a growth in plain old vanilla high deductibles. You have both the ACA and market forces reinforcing one another on the deductibles.”

In recent years, many employers have significantly increased the amount that employees must pay in premium contributions, deductibles, copays and/or coinsurance.

In fact, “we are seeing historic moderation in costs, including in premiums,” Altman added. But “if you say that to an average person, they may look at you as if you’re out of your mind” because, individually, they have seen how much their own cost-sharing has gone up.

Higher out-of-pocket costs discourage some patients from seeking care even when they need it. Altman notes, “Cost-sharing has an impact on use. We can’t pinpoint the effect of it.”

Effect on coverage

Meanwhile, some industry watchers have predicted that the employer mandate in the ACA, which takes effect next year, will cause many employers to drop coverage and send their employees to the public insurance exchanges instead, but the research doesn’t bear that theory out.

Gary Claxton, a vice president at the Kaiser Family Foundation, said, “We didn’t see anything in the survey this year that would tell us that is happening. It’s quite likely that they didn’t rush to do that in the first year because they were uncertain about how things would work. They early renewed” their group coverage.

Altman confirms there’s “interest, but relatively small numbers so far.”

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