Health insurance premiums up 87% since 2000

Survey shows health insurance Premiums continue to rise twice as fast as wages. Health insurance premiums increased at the slowest rate since 2000 this year but still rose at more than twice the rate of inflation, a study released Tuesday found. The 2006 Kaiser/HRET Employer Health Benefits Survey finds health insurance premiums rose 7.7% in 2006. Enrollment in consumer-driven plans remains modest.

This annual survey of employers provides a detailed look at trends in employer-sponsored health coverage, including changes in premiums, employee contributions, cost-sharing policies, and other relevant information. This year the survey also documented the prevalence of high-deductible health plans associated with a savings option, including the percentage of employers offering these plan types and the percentage of workers covered by them. The 2006 survey included 3,159 randomly selected public and private firms with three or more employees (2,122 of which responded to the full survey and 1,037 of which responded to an additional question about offering coverage). Researchers at the Kaiser Family Foundation, The Center for Studying Health System Change and Health Research and Educational Trust designed and analyzed the survey.

Premiums for employer-sponsored health coverage rose an average 7.7 percent in 2006, less than the 9.2 percent increase recorded in 2005 and the recent peak of 13.9 percent in 2003, according to the 2006 Employer Health Benefits Survey released today by the Kaiser Family Foundation and the Health Research and Educational Trust (HRET). Key findings from the survey were also published today as a Health Affairs Web Exclusive.

This year's survey recorded the slowest rate of premium growth since 2000, though premiums still increased more than twice as fast as workers' wages (3.8 percent) and overall inflation (3.5 percent). Premiums have increased 87 percent over the past six years. Family health coverage now costs an average $11,480 annually, with workers paying an average of $2,973 toward those premiums, about $1,354 more than in 2000.

“While premiums didn't rise as fast as they have in recent years, working people don't feel like they are getting any relief at all because their premiums have been rising so much faster than their paychecks,” said Foundation President and CEO Drew E. Altman, Ph.D.” To working people and business owners a reduction in an already very high rate of increase just means you're still paying more.”

“The burden of a fragmented system of coverage falls heaviest on the small employer and their workers,” said HRET President Mary A. Pittman, Dr. P.H. “About two in five small businesses do not even offer health insurance, and those that do require workers on average to contribute significantly more to their premiums for family coverage.”

While there is substantial debate about consumer-driven health care, the survey finds modest enrollment in consumer-driven plans, with 2.7 million workers in high-deductible plans with a savings option, including those that qualify for Health Savings Accounts (HSAs). About 4 percent of covered workers are enrolled in such plans, a rate statistically no different from last year. Relatively few firms that offer other types of health insurance say that they are “very likely” to adopt high-deductible plans that qualify for an HSA (4 percent) or that are associated with a Health Reimbursement Arrangement (6 percent) in the next year.

The annual Kaiser/HRET survey provides a detailed picture of how employer coverage is changing over time in terms of availability, costs and coverage for the 155 million Americans who rely on employer-sponsored health insurance. It was conducted between January and May of 2006 and included 3,159 randomly selected, non-federal public and private firms with three or more employees (2,122 of which responded to the full survey and 1,037 of which responded to an additional question about offering coverage).

About 7 percent of employers offering health benefits offer high-deductible health plans with a savings option – a category that includes both plans that qualify a worker to establish an HSA as well as those associated with a Health Reimbursement Arrangement (HRA). These tax-favored accounts that employees can use to pay for medical expenses are often described as consumer-driven because consumers pay directly for a greater share of their health care and may have an incentive to reduce their health-care spending.Among firms with 1,000 or more workers, 12 percent offer an HSA-qualified plan.

An estimated 4 percent of covered workers are enrolled in high-deductible plans with a savings option, compared with 60 percent in preferred provider organizations (PPOs), 20 percent in health maintenance organizations, 13 percent in point-of-service plans, and 3 percent in conventional indemnity plans. Among the 2.7 million workers estimated to be enrolled in HSAs or HRAs this year, 1.4 million are in HSA-qualified plans (up from 0.8 million estimated last year) and 1.3 million are in plans with HRAs (statistically unchanged from last year's 1.6 million estimate).

Premiums for these plans averaged $3,405 annually for single coverage, and $9,484 for family coverage. These are lower than the premiums for other types of health plans, likely in part because employee cost sharing is higher. However, contributions from the employer toward the savings accounts are not included. These average $743 for single coverage and $1,359 for family coverage. Including these costs, overall spending for these plans are on average similar to that for PPOs (the most common type of plan).

“We don't know yet whether workers and employers ultimately will embrace consumer-driven health plans in big numbers, but it certainly hasn't been a tidal wave,” said Kaiser Family Foundation Vice President, Gary Claxton, co-author of the study and director of the Foundation's Health Care Marketplace Project. “When you look at the total costs, the savings from these plans may not be enough to overcome consumer concerns about higher cost sharing.”

“We are still losing the race between premiums and workers' earnings – and if that trend persists, employer-based coverage will continue to decline as fewer employers and workers can afford the cost of coverage,” said Jon Gabel, a study co-author and vice president of the Center for Studying Health System Change.

Other key findings include: About 61 percent of firms nationally offer health benefits to at least some of their workers, statistically unchanged from last year's offer rate (60 percent). While nearly all large businesses (with at least 200 workers) offer health benefits to their workers, fewer than half of the smallest firms (with three to nine workers) do ; On average, workers are paying $259 more this year than they did last year toward the cost of family health coverage.Workers at small firms (with three to 199 employees) on average contribute significantly more to their premiums ($3,550 for family coverage) than workers at larger companies ($2,658 for family coverage). On average, workers this year are paying about 16 percent of premiums for single coverage and 27 percent of premiums for family coverage, with their employers paying the rest. That share is essentially unchanged in recent years ; In 2006, the average in-network PPO deductible for workers facing a deductible reached $473 for single coverage. Average co-payments for drugs across plan types were $11 for generic drugs, $24 for preferred drugs and $38 for non-preferred drugs ; Few employers have a lot of confidence in strategies to contain rising health-care costs. For example, only 17 percent of small employers and 28 percent of large employers say that they consider disease management programs “very effective” at controlling health-care costs. Employers were less likely to rate other strategies as very effective, including consumer-directed health plans (16 percent of small and 13 percent of large employers), higher employee cost sharing (15 percent of small and 13 percent of large firms), and tighter managed-care networks (9 percent of small and 4 percent of large firms).

The full survey is available online. The Health Affairs article based on the survey is also available online or through the Kaiser Web site above.

The survey is a joint project of the Kaiser Family Foundation and the Health Research and Educational Trust. A research team at Kaiser and HRET conducted and analyzed the survey, led by Gary Claxton, Vice President and Director of the Health Care Marketplace Project at Kaiser, and Jon Gabel, Vice President of the Center for Studying Health System Change, which works on the project under contract with HRET.

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