Employers shift health care costs to employees

Workers on average are paying nearly $4,000 this year toward the cost of family health coverage - an increase of 14 percent, or $482, above what they paid last year, according to the benchmark 2010 Employer Health Benefits Survey released this month by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET). 

The jump occurred even though the total premiums for family coverage, including what employers themselves contribute, rose a modest 3 percent to $13,770 on average in 2010, the survey found.  In contrast, the amount employers contribute for family coverage did not increase. 

Preferred Provider Organizations (PPOs) continue to dominate the employer market, enrolling 58 percent of covered workers.  Average PPO family premiums topped $14,000 annually in 2010.

Since 2005, workers' contributions to premiums have gone up 47 percent, while overall premiums rose 27 percent, wages increased 18 percent, and inflation rose 12 percent.
   
Many employers are also raising the annual deductibles workers must pay before their health plans begin to share most health care costs.  A total of 27 percent of covered workers now face annual deductibles of at least $1,000, up from 22 percent in 2009, the survey finds.  Among small firms (3-199 workers), 46 percent face such deductibles.

The annual Kaiser/HRET survey provides a detailed picture of private health insurance coverage and costs.

"With the economy struggling, businesses have been shifting more of the costs of health insurance to workers through premiums, deductibles and other cost-sharing," Kaiser President and CEO Drew Altman, Ph.D., said. "This may be helping to stem the rapid rise in premiums that we saw in the early 2000s, but it also means employer coverage is less comprehensive.  From a consumer perspective, the cost of health insurance just keeps going up faster than wages."
   
"High out-of-pocket expenses and premiums affect health care decisions for patients.  If premiums and costs continue to be shifted to consumers, households will face difficult choices, like forgoing needed care, or reexamining how they can best care for their families," said Maulik Joshi, Dr.P.H., president of HRET and senior vice president for research at the American Hospital Association.
   
The nation's recession contributed to the shift in burden to workers.  In response to the economic downturn, 30 percent of employers say they reduced the scope of health benefits or increased cost sharing, and 23 percent report increasing the amount employees pay for coverage, the survey finds.

Among other plan types, only consumer-driven plans (which are high-deductible plans that also include a tax-preferred savings options such as a Health Savings Account or Health Reimbursement Arrangement) saw growth in their market share.  Such plans now enroll 13 percent of covered workers, up from 8 percent last year.

"Consumer-driven plans have clearly established a foothold in the employer market, tripling their market share from 4 percent in 2006 to 13 percent today," said study lead author Gary Claxton, a Kaiser vice president and director of the Healthcare Marketplace Project.

Surprisingly, the survey saw the percentage of firms offering health benefits in 2010 increase sharply to 69 percent, up from 60 percent in 2009, largely because of an increase in the offer rate among firms with 3 to 9 workers.  Because most workers are employed by large firms, the shift among the smallest firms did not have a major effect on either the percentage of workers offered health benefits or the percentage of workers covered at their job. 

The reason for the large increase in offer rate is unclear.  Because of the poor economic climate in 2010, it is unlikely that many firms began offering coverage this year.  A possible explanation is that non-offering firms were more likely to fail during the past year, with the attrition of non-offering firms leading to a higher offer rate among surviving firms.

Other findings from the survey include:
   

  • Single coverage.  The survey also tracks the premiums for worker-only health benefits, which increased 5 percent in 2010 to reach $5,049 annually.  Workers on average are paying $899 annually for single coverage, up from $779 in 2009.   Forty-seven percent of covered workers are in single coverage plans.
  • Physician office visits.  Among covered workers with a copayment for in-network physician office visits, the average copayment increased a small but statistically significant amount from 2009 to 2010 -- from $20 to $22 for primary care and from $28 to $31 for specialty care.
  • Mental health benefits.  In response to the 2008 Mental Health Parity and Addiction Equity Act, 31 percent of firms with more than 50 workers made changes to the mental health benefits they offer.  Most of this group eliminated limits on coverage to comply with the law, though a small share (5 percent of those making changes) dropped mental health coverage altogether.
  • Wellness benefits.  About three-fourths (74 percent) of employers offering health benefits offer at least one of the following wellness programs: weight loss program, gym membership discounts or on-site exercise facilities, smoking cessation program, personal health coaching, classes in nutrition or healthy living, web-based resources for healthy living, or a wellness newsletter.
  • Health risk assessments.  Among firms offering coverage, 11 percent give their employees the option of completing a health risk assessment to help employees identify potential health risks.  Within this group, 22 percent -- or a relatively small two percent of all employers -- offer financial incentives such as lowering the worker's share of premiums or offering merchandise, gift cards, travel, or cash to their workers.  Large firms are more likely than small firms both to offer assessments and to offer financial incentives.

Now in its 12th year, the survey is a joint project of the Kaiser Family Foundation and the Health Research & Educational Trust.  The survey was conducted between January and May of 2010 and included 3,143 randomly selected, non-federal public and private firms with three or more employees (2,046 of which responded to the full survey and 1,097 of which responded to a single question about offering coverage).  A research team at Kaiser and HRET conducted and analyzed the survey, led by Kaiser's Gary Claxton and including researchers at the National Opinion Research Center (NORC) at the University of Chicago (working on the project under contract to HRET). 

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