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
WASHINGTON, D.C. – 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 that 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 the 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.
Premiums rose a 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.
The shift has been most dramatic for workers in small businesses with three to 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, 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, cost and coverage. It was conducted between January and May of 2008 and included 2,832 randomly selected, non-federal 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, Though Enrollment Rises In HSA-Qualified Plans
Preferred Provider Organizations continue to dominate the employer market, covering 58 percent of covered workers. Health Maintenance Organizations cover 20 percent of workers, with 12 percent in Point-of-Service 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 a Health Savings Account (HSA) or 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 (three to 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, though 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 an 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 10 say that the primary reason is cost – and more than four in 10 say that in their opinion the most successful result has been lower costs. About four in 10 employers say that communicating with 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 (three to nine workers) offer health benefits. Among all small firms (three to 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 (three to 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 working for big employers,” said Kaiser Vice President Gary Claxton, co-author of the study and director of the Foundation’s marketplace research.
Three In 10 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 who did so last year but less than half the 66 percent who 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 employees 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 programs, 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), reduced 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 co-author Jon Gabel, senior fellow at the National Opinion Research Center at the University of Chicago.
Other key findings from the survey include:
• Drug benefits. Most plans now have a three- or four-tier system to determine cost-sharing for drugs. For workers in such plans, the average co-payments this year are $10 for first-tier drugs, $26 for second-tier drugs, and $46 for third-tier drugs. Co-payments for fourth-tier drugs, which may include costly biological agents and lifestyle drugs, averaged $75.
• Future outlook. When asked about their plans for next year, 14 percent of firms say they are “very likely” to raise workers’ premium contribution next year, and 12 percent say they are “very likely” to raise deductibles. Very few firms say they are “very likely” to restrict eligibility for coverage or drop health coverage altogether.
The full survey is available online. The Health Affairs article based on the survey is also available online to subscribers or via the free link at the Kaiser Web site above.
Now in its 10th year, the survey is a joint project of the Kaiser Family Foundation and the Health Research & 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, senior fellow at the National Opinion Research Center (NORC) at the University of Chicago. NORC works on the project under contract to HRET.
The Kaiser Family Foundation/Health Research & Educational Trust 2008 Annual Employer Health Benefits Survey reports findings from a telephone survey of 1,927 randomly selected public and private employers with three or more workers. Fieldwork was conducted between January and May 2008, with an overall response rate of 48 percent, which includes firms that offer and do not offer health benefits. Among firms that offer health benefits, the survey’s response rate is 50 percent. Firms that declined to participate in the full survey were asked a single question about whether they offer health insurance benefits. A total of 2,832 firms responded to this question (including 1,927 who responded to the full survey and 905 who responded to this one question). Since firms are selected randomly, it is possible to extrapolate from the sample to national, regional, industry, and firm size estimates using statistical weights. This year we have changed the method used to report the annual percentage premium increase. In prior years, the reported percentage was based on a series of questions that asked responding firms the percentage increase or decrease in premiums from the previous year to the current year for a family of four in the largest plan of each plan type (e.g., HMO, PPO). The reported premium increase was the average of the reported percentage changes (i.e., 6.1% for 2007) weighted by covered workers. In order to track premium values and increases with greater consistency, this year, we started calculating the overall percentage increase in premiums from year to year for family coverage using the average of the premium dollar amounts for a family of four in the largest plan of each plan type reported by respondents and weighted by covered workers (i.e., $12,106 for 2007 and $12,680 for 2008, an increase of 5%). For more information on the survey methodology, please visit the Survey Design and Methods Section at http://www.kff.org/insurance/7790.
The Kaiser Family Foundation is a non-profit private operating foundation, based in Menlo Park, California, dedicated to producing and communicating the best possible information, research and analysis on health issues.
Founded in 1944, the Health Research & Educational Trust (HRET) is a private, not-for-profit organization involved in research, education, and demonstration programs addressing health management and policy issues. An affiliate of the American Hospital Association (AHA), HRET collaborates with health care, government, academic, business, and community organizations across the United States to conduct research and disseminate findings that shape the future of health care. Visit HRET for more information.
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 online.