Premiums Rise 9.2% in 2005, Less Than in
2004 But Three Times the Increase in Workers’
Wages
One in Five Firms Offer
High-Deductible Health Plan Option; 2.4 Million
Workers with Insurance Enrolled in
Consumer-Driven Plans
Washington, D.C.
– The percentage of businesses offering health
insurance to their workers has declined steadily
over the last five years as the cost of
providing coverage continues to outpace
inflation and wage growth, according to the 2005
Annual Employer Health Benefits Survey released
by the Kaiser Family Foundation and Health
Research and Educational Trust.
The survey found that three in
five firms (60%) offered coverage to workers in
2005, down significantly from 69% in 2000 and
66% in 2003. The drop stems almost entirely from
fewer small businesses offering health benefits,
as nearly all businesses (98%) with 200 or more
workers offer such benefits.
“It is low-wage workers
who are being hurt the most by the steady drip,
drip, drip of coverage draining out of the
employer based health insurance system,” Kaiser
Family Foundation President and CEO Drew E.
Altman, Ph.D., said.
Premiums increased an average of
9.2% in 2005, down from the 11.2% average found
in 2004. The 2005 increase ended four
consecutive years of double-digit increases, but
the rate of growth is still more than three
times the growth in workers’ earnings (2.7%) and
two-and-a-half times the rate of inflation
(3.5%). Since 2000, premiums have gone up 73%.
The annual premiums for family
coverage reached $10,880 in 2005, eclipsing the
gross earnings for a full-time minimum-wage
worker ($10,712). The average worker paid $2,713
toward premiums for family coverage in 2005 or
26% of the total health premium. While workers’
share of their premium has been relatively
stable over the past few years, they are now
paying on average $1,094 more in premiums for
family coverage than they did in 2000.
“While premium increases
slowed this year, they continue to rise much
faster than inflation and other economic
indicators. As a result, workers and businesses
alike are finding it harder to afford health
coverage,” said Health Research and Educational
Trust President Mary A. Pittman, Dr. P.H.
High-deductible health
plans
The survey found that 20% of
employers who offer health insurance now provide
a high-deductible health plan option. Jumbo
firms – those with 5,000 or more workers – are
significantly more likely than smaller firms to
offer a high-deductible plan option, with 33%
offering one in 2005. The survey defines
high-deductible health plans as those with at
least a $1,000 deductible for single coverage or
at least a $2,000 deductible for family
coverage.
Among employers who offer a
high-deductible plan, relatively few (19.5%, or
3.9% of all offering employers)
also make a contribution to a health
reimbursement arrangement (HRA), offer a plan
that would permit an enrollee to establish a
health savings account (HSA), or do both.
HRAs and HSAs are tax-favored accounts that
employees can use to pay for medical expenses.
Such arrangements are often described as
consumer-driven because patients pay for a
greater share of their health care directly,
rather than through insurers, and therefore may
have a financial incentive to reduce their
health-care spending.
Despite the growing availability
of high-deductible plans, relatively few workers
are enrolled in consumer-driven arrangements.
The survey estimates that this year about 2.3%
of non-federal covered workers, or 1.6 million
people, are enrolled in high-deductible health
plans with an HRA, and about 1.2%, or 810,000
people, are enrolled in plans that are eligible
for use with an HSA.
“Consumer-driven plans are
proving attractive to some, but with just a
couple million people now enrolled, it's too
early to know whether they'll have a meaningful
effect on the health system,” said Gary Claxton,
a Kaiser Family Foundation vice president and
co-author of the study. “The jury is still out
on whether employees feel that these
arrangements work for them, particularly when
they get sick, and on whether employers feel
that they have a real impact on costs.”
The survey also provides a
detailed look at the features of high-deductible
health plans, including premiums, deductibles,
use of spending accounts, and employer and
worker contributions. Such plans can cost less
than other forms of employer-sponsored health
coverage, but also leave workers exposed to
greater potential out-of-pocket costs.
“Premium increases have
slowed somewhat, but there's little confidence
out there that we have an answer to health care
cost growth,” said Jon Gabel, co-author of the
study. “In the mid-1990s, premium hikes dropped
to less than 1%, and we're still far away from
that right now.”
Other highlights from the 2005
survey include:
- Reasons for not
offering coverage. Firms that do
not offer health benefits to their workers –
the overwhelming majority of whom are small
firms – were most likely to cite cost as a
key factor, with nearly three in four (73%)
saying high premiums were “very important”
to their decision. In comparison, just over
half (52%) said their firm’s small size and
one in three (33%) said the fact that their
workers had access to other coverage were
very important to their decision.
- Type of insurance.
In 2005, PPO plans were more common than
ever, with 61% of all employees with health
coverage enrolling in a PPO (up from 55% in
2004). Enrollment in HMOs, which generally
cost less than PPOs, fell to 21% in 2005
from 25% in 2004. Conventional, or
indemnity, benefit plans have all but
disappeared, covering just 3% of covered
workers.
- Future plans.
Looking toward the future, more
than 40% of large firms (200 or more
workers) offering health benefits say they
are “very likely” to ask employees to pay
more in premiums next year, while just 15%
of smaller firms say they plan to do so.
Across all firms offering coverage,
relatively few say that they are “very
likely” in the next year to raise
deductibles (8%), raise office visit
cost-sharing (7%) or raise prescription drug
copayments (7%). About 1% of firms say they
are “very likely” to drop health coverage
entirely in the near future.
- Utilization and
disease management. About eight in
10 covered workers (81%) are in a health
plan that uses case management for high-cost
claims. Most covered workers also must get
prior certification for inpatient services
(75%) and outpatient surgery (55%). More
than half (56%) of covered workers are
enrolled in a plan with at least one disease
management program. Among workers in these
plans, virtually all (99%) are in a plan
that provides management for diabetes. Large
majorities are also in plans that provide
management for asthma (86%), hypertension
(82%), and high cholesterol (66%).
- Confidence in
cost-containment strategies. Few
employers have a lot of confidence in
strategies to contain rising health-care
costs. For example, 16% of employers say
consumer-driven health plans are “very”
effective at controlling costs, while
another 45% say they are “somewhat”
effective. Nearly as many view higher
employer cost-sharing as very (12%) or
somewhat (46%) effective, and view disease
management as very (14%) or somewhat (38%)
effective. Fewer see tighter managed-care
networks as very (7%) or somewhat (37%)
effective.
The 2005 Employer Health
Benefits Survey was conducted between January
and May of 2005 and included 2,995 randomly
selected, non-federal public and private firms
with three or more employees (2,013 of which
responded to the full survey and 982 of which
responded to an additional question about
offering coverage).
The full survey is
available online at.
A briefing on the survey's
findings will be
webcast live beginning at 10 a.m. on
Wednesday, September 14. An archived version of
the video will be posted by 5 p.m. ET that day.
In addition, two articles based on the survey’s
results will be released that day by Health
Affairs and will be
available online for free.
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, formerly of HRET and
now Vice President of the Center for Studying
Health System Change.
|
METHODOLOGY
The Kaiser Family
Foundation/Health Research and
Educational Trust 2005 Annual Employer
Health Benefits Survey (Kaiser/HRET)
reports findings from a telephone survey
of 2,995 randomly selected public and
private employers, including 2,013 who
responded to the full survey and an
additional 982 who responded to one
question about whether or not they
provide health coverage to their
employees. Kaiser/HRET drew its sample
from a Dun & Bradstreet list of the
nation’s employers with three or more
workers. The Kaiser/HRET Employer
Benefits Survey is based on previous
surveys sponsored by the Health
Insurance Association of America from
1987–1990 and KPMG from 1991–1998.
Researchers at the Kaiser Family
Foundation and the Health Research and
Educational Trust designed and analyzed
the survey and National Research LLC
conducted the field work between January
and May 2005. The overall response rate
for the survey was 48%. All statistical
tests are performed at the 0.05 level
except where otherwise noted. Beginning
with the 2003 Survey, several
methodological changes were made to the
survey, including standardizing survey
weights to U.S. Census data. Therefore,
historical data in the exhibits may
differ slightly from previously
published estimates. |
The Kaiser
Family Foundation is a non-profit, private
operating foundation dedicated to providing
information and analysis on health care issues
to policymakers, the media, the health care
community, and the general public. The
foundation is not associated with Kaiser
Permanente or Kaiser Industries.
The Health
Research and Educational Trust is a private,
not-for-profit organization involved in
research, education, and demonstration programs
addressing health management and policy issues.
Founded in 1944, HRET collaborates with health
care, government, academic, business, and
community organizations across the United States
to conduct research and disseminate findings
that help shape the future of health care.
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