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Yearly Premiums For Family Health Coverage Rise To $12,680 In 2008, Up 5 Percent, As Many Workers Also Face Higher Deductibles

Workers Pay An Average Of $3,354 Annually Toward Family Coverage, More Than Double What They Paid Nine Years Ago

Growing Shares Of Workers Now Face Deductibles Of At Least $1,000, Including More Than One-Third Of Those Covered By Smaller Firms

Bethesda, MD -- Premiums for employer-sponsored health insurance rose to $12,680 annually for family coverage this year -- with employees on average paying $3,354 out of their paychecks to cover their share of the cost -- and the scope of coverage has changed, with many more workers now enrolled in high-deductible plans, according to the 2008 Employer Health Benefits Survey released today by the Kaiser Family Foundation and Health Research & Educational Trust (HRET). Key findings from the benchmark annual survey of small and large employers were also published today as a Web Exclusive in the journal Health Affairs. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w492

Premiums rose a more modest 5 percent this year, but they have more than doubled since 1999, when total family premiums stood at $5,791 (of which workers paid $1,543). During the same nine-year period, workers’ wages increased 34 percent, and general inflation rose 29 percent.

This year many workers are also facing higher deductibles in their plans, including a growing number with general plan deductibles of at least $1,000 -- 18 percent of all covered workers in 2008, up from 12 percent last year. This is partly, but not entirely, driven by growth in consumer-directed plans such as those that qualify for a tax-preferred health savings account (HSA).

The shift has been most dramatic for workers in small businesses with 3-199 workers, where more than one in three (35 percent) covered workers must pay at least $1,000 out of pocket before their plan generally will start to pay a share of their health care bills -- rising from 21 percent last year. For workers facing deductibles in preferred provider organizations (PPOs), the most common type of plan, the average deductible rose to $560 in 2008, up nearly $100 from 2007.

“With rising deductibles, more and more people face a substantial amount out of pocket for their health care before their insurance fully kicks in,” Kaiser President and CEO Drew Altman, Ph.D., said. “Health insurance is steadily becoming less comprehensive, and it’s no wonder that in today’s tough economic climate many families count health care costs as one of their top pocketbook issues.”

Even modest growth in premiums and deductibles can result in financial challenges for many working families, particularly when coupled with high food and gas prices in 2008. But rising health care costs are also a burden on employers, particularly small businesses,” said HRET Interim President John Combes, M.D.

The annual Kaiser/HRET survey provides a detailed picture of how employer coverage is changing over time in terms of availability, costs, and coverage. It was conducted between January and May of 2008 and included 2,832 randomly selected, nonfederal public and private firms with three or more employees (1,927 of which responded to the full survey and 905 of which responded to a single question about offering coverage). The annual percentage premium increase is calculated by comparing this year’s average premium to last year’s, a change in methodology designed to be more reflective of changes across the entire market.

Most Workers Are In PPOs, Although Enrollment Rises In HSA-Qualified Plans

PPOs continue to dominate the employer market, covering 58 percent of covered workers. Health maintenance organizations (HMOs) cover 20 percent of workers, with 12 percent in point-of-service (POS) plans, 8 percent in consumer-directed plans, and 2 percent in conventional indemnity plans.

The share in consumer-directed plans -- high-deductible plans that include a tax-preferred savings option such as an HSA or a health reimbursement arrangement (HRA) -- has increased to 8 percent today from 5 percent last year and 4 percent in 2006. An estimated 5.5 million covered workers are enrolled in these plans, including about 3.2 million in plans that would allow the worker to establish an HSA and 2.2 million in plans with an HRA established by the employer.

The growth in consumer-directed plans occurred mostly among workers at small firms (3-199 workers), where 13 percent are now in this type of plan, compared with 8 percent in 2007. In firms with at least 200 employees, 5 percent of workers are enrolled in such plans -- statistically unchanged from last year. By definition, these plans all have high deductibles -- with the average general annual deductible for single coverage at $2,010 for HSA-qualified plans and $1,552 for HRAs.

Premiums for consumer-directed plans are generally lower than for other types of plans, although in addition to the premiums, employers may also contribute money to the savings accounts. On average, firms pay a total of $8,291 annually toward the cost of family coverage for a HSA-qualified plan, including a $1,522 contribution to the account. In comparison, firms on average contribute $9,495 toward the cost of family coverage in non-consumer-directed plans.

Among firms offering such consumer-directed plans, six in ten say that the primary reason was cost -- and more than four in ten say that in their opinion the most successful result has been lower costs. About four in ten employers say that communicating and educating their workers about the change was their greatest challenge in adopting consumer-directed plans.

Small Businesses And Their Workers Face Challenges

As in the past, smaller businesses are significantly less likely than larger ones to offer health insurance. While virtually all large firms (200 or more workers) offer health benefits to their workers, only 62 percent of smaller firms do so. Just under half (49 percent) of the smallest firms (3-9 workers) offer health benefits. Among all small firms (3-199 workers) not offering health benefits, nearly half (48 percent) cite high premiums as the most important reason for not doing so.

As in the past, the survey finds that workers in small businesses that offer health benefits on average pay more for family coverage than workers at larger firms do -- $4,101 annually for workers in small firms (3-199 workers), compared with $2,982 annually for workers in larger firms. For single coverage, the opposite is true, with workers at small firms annually contributing less on average than workers at large firms ($624 vs. $769).

“Many small businesses struggle just to provide any health benefits for their workers, and when it is offered, their workers on average pay more for family coverage and face higher deductibles than those at big employers,” said Kaiser Vice President Gary Claxton, coauthor of the study and director of the foundation’s marketplace research.

Three In Ten Large Employers Offer Retiree Health Benefits

The survey finds that 31 percent of large firms (200 or more workers) offer retiree health benefits this year, similar to the 33 percent that did so last year but less than half the 66 percent that did so in 1988.

Among those large firms offering retiree health benefits, 69 percent say that at least some active employees will be eligible for retiree health benefits if they retire at age 65 or older, and 90 percent say that some active employees will be eligible if they retire before age 65. Within these large firms reporting that at least some active employee are eligible for early-retiree or Medicare-age-retiree health benefits, about 78 percent of active workers would be eligible at age 65 or older, and 72 percent of active workers would be eligible if they retire before age 65.

Most Firms Offer Wellness Programs

The survey finds that more than half of all firms offering health benefits also provide at least one of seven wellness programs: weight loss program, gym membership discounts or on-site exercise facilities, smoking cessation programs, personal health coaching, classes in nutrition or healthy living, Web-based resources for healthy living, or a wellness newsletter. However, relatively few firms offer incentives such as gift cards, travel, merchandise, or cash (7 percent), a smaller share of the premium (4 percent), or a lower deductible (1 percent) to encourage workers to participate in wellness programs.

In addition, 10 percent of firms offering health benefits give their employees the option of completing a health risk assessment to help employees identify potential health risks, and of those, 12 percent offer some sort of financial incentive for workers to complete them.

“Large firms have invested in wellness programs and believe they improve health (79 percent) and reduce cost (68 percent),” said coauthor Jon Gabel, senior fellow at the National Opinion Research Center at the University of Chicago.

Other key findings from the survey include the following:

After the embargo lifts, the Health Affairs article by Claxton and coauthors will be available at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w492 The full 2008 Employer Health Benefits Survey will be available at www.kff.org/insurance/7790/index.cfm


ABOUT
HEALTH AFFAIRS:

Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. Web Exclusives are supported in part by a grant from the Commonwealth Fund.

 

©2008 Project HOPE–The People-to-People Health Foundation, Inc.