Rising Cost of Health Insurance Slowing -- But Still Rising
September 13, 2007
Despite slowing, increases in the cost of health insurance premiums continue to be greater than those of inflation and wages, the Kaiser Family Foundation reports this week. Try not to get sick, folks.
The 6.1 percent average increase this year was the slowest rate of premium growth since 1999, when premiums rose 5.3 percent, according to the summary of findings. Yet premiums for family coverage have increased 78 percent since 2001, while wages have gone up 19 percent and inflation has gone up 17 percent.
The total average annual cost for family coverage premiums rose this year to $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy.
The New York Times explains:
Because doctor and hospital costs continue to rise at an even faster rate, the modest slowdown in insurance inflation mainly reflects cutbacks in coverage by many health plans, which have found ways to make employees pay more for their care.
Sixty percent of employers offer health benefits, including nearly all large companies with 200 or more workers. Fewer than half of small businesses with three to nine employees do so, the survey found.
"Despite the comparatively modest increase in premiums during a period of strong economic growth, the percentage of workers obtaining coverage from their employer remained statistically unchanged," according to a Health Affairs article based on the survey. The 60 percent of firms offering health benefits to at least some of their workers is statistically unchanged from last year's 61 percent offer rate.
The annual Kaiser/HRET survey, conducted between January and May 2007, included 3,078 randomly selected, non-federal public and private firms with three or more employees and was based on 1,997 that responded to the full survey.
While premiums continue to rise faster than workers' wages, this year's gap of 2.4 percentage points is much smaller than the 10.9 percentage point gap recorded four years ago, when premiums rose 13.9 percent and wages grew just 3 percent.
According to the Kaiser Foundation:
Covered workers on average pay 16 percent of the overall premiums for single coverage and 28 percent for family coverage shares that have remained relatively stable over the past years. However, workers in small firms (3-199 workers) pay significantly more on average toward the cost of family coverage ($4,236 annually) compared to larger firms ($2,831 annually). For single coverage, the opposite is true, with workers at small firms annually contributing less on average than workers at large firms ($561 vs. $759).
"The employer-sponsored health benefits market did not experience large changes in 2007," reported Kaiser's report summary.
In fact, despite the extensive attention paid to consumer-driven health plans (much promoted by the Bush administration and many insurance companies and banks), the survey found such health savings account (HSA) plans attained only a "modest enrollment" of 3.8 million workers. That was 5 percent of all covered employees, compared with 4 percent in 2006. This is in line with the recent second annual Consumerism in Health Care Survey by nonpartisan organizations the Employee Benefit Research Institute (EBRI) and The Commonwealth Fund, which also found that Americans have not yet warmed to these types of health plans, a relatively new kind of coverage that offers reduced premiums but carries higher annual deductibles.
(For much more on this, see last week's Understanding Employee Benefits.)
Although Kaiser did not try to project 2008 costs for health premiums, it did report that many employers indicate they expect to make significant changes to their health plans and benefits in 2008.
According to a statement:
Overall, 21 percent of firms say they are "very likely" to raise workers' premium contribution next year. Some firms also say they are "very likely" to increase office visit cost-sharing (13 percent), increase deductibles (12 percent) and increase prescription drug cost-sharing (11 percent). Very few firms say they are "very likely" to restrict eligibility for coverage or drop health coverage altogether.
Other analysts are forecasting increases for next year, as noted by the NYT: Mercer Health & Benefits expects a 6.7 percent increase; the PricewaterhouseCoopers Health Research Institute predicts 9.9 percent; and, according to AON Consulting, an 11 percent increase.
See also: Understanding Employee Benefits