After four years of relatively moderate increases, health care costs in 2011 shot upward, according to the Kaiser Family Foundation/Health Research & Educational Trust 2011 Employer Health Benefits Survey released today.
Kaiser’s annual survey shows that annual premiums for employer-sponsored family health coverage jumped 9 percent over 2010, to $15,073 total, up from $13,770 last year. Premiums for single employees rose a bit less, by 8 percent, with the total cost reaching $5,429, up from $5,049 in 2010.
What makes these 2011 hike noteworthy is that last year’s increase was only 3 percent for families and 5 percent for individuals — significantly less than the 9 percent/8 percent hikes this year, and tough to take give the struggling post-recession economy when the increase in workers’ wages (2.1 percent) isn’t even keeping up with the general rise in inflation (up 3.2 percent).
“Painful” increase during a weak economic recovery
“This year’s 9 percent increase in premiums is especially painful for workers and employers struggling through a weak recovery,” Kaiser President and CEO Drew Altman, Ph.D. said in a press release announcing the annual survey findings.
Although the last four years have seen more moderate increases between 3-5 percent, the Kaiser survey notes that since 2001 family premiums have increased by 113 percent, compared with 34 percent for workers’ wages and 27 percent for inflation. The 2011 health care increase would seem to be a return to the 10-year trend.
The 13th annual Kaiser/HRET survey of small and large employers “provides a detailed picture of trends in private health insurance costs and coverage. This year’s survey also looked at employers’ experiences with several already implemented provisions of the 2010 health reform law affecting employer coverage.”
2.3 million young adults added to coverage
One key finding: the survey estimates that “employers added 2.3 million young adults to their parents’ family health insurance policies as a result of the health reform provision that allows young adults up to age 26 without employer coverage on their own to be covered as dependents on their parents’ plan. Young adults historically are more likely to be uninsured than any other age group,” and according to Drew Altman, this is at the high end of the estimates for the number of young adults who might take advantage of this provision.
“The law is helping millions of young adults to obtain health coverage. In the past, many of these young adults would have lost coverage when they left home or graduated college,” said study lead author Gary Claxton, a Kaiser vice president and co-executive director of the Kaiser Initiative on Health Reform and Private Insurance.
The other key survey finding is that some 31 percent of covered workers are now in high-deductible health plans, “facing deductibles for single coverage of at least $1,000, including 12 percent facing deductibles of at least $2,000. Covered workers in smaller firms (3-199 workers) are more likely to face such high deductibles, with half of workers in smaller firms facing deductibles of at least $1,000, including 28 percent facing deductibles of $2,000 or more.”
The survey analysis notes that “these numbers in part reflect the rise of consumer-driven plans, which are high-deductible plans that include a tax-preferred savings options such as a Health Savings Account or Health Reimbursement Arrangement.” Over the past two years, more organizations have started to offer these plans, and the share of covered workers enrolled has doubled, from 8 percent in 2009 to 17 percent in 2011. “Plans that can be used with a Health Savings Account have lower premiums than other plan types, but must have annual deductibles of at least $1,200 for an individual and $2,400 for a family this year.”
Why the big jump in overall costs this year?
According to Kaiser CEO Altman, “in the short term I would expect to see more high deductible plans.” He described the move of so many people to these plans as part of a “quiet revolution in health care” that’s happening under the radar and without much notice or public debate.
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One question Altman couldn’t answer (and he even posed it himself), is why the big jump in health care costs this year compared to last?
He noted that the Kaiser/HRET survey isn’t set up to answer that question, but he speculated that employers might have anticipated a return to a more normal economy in 2011, including a more normal utilization of health care, so they increased their health care costs to cover the anticipated increaser in utilization that never developed due to the sluggish economy. “If I had to guess,” Altman said, “I would guess that next year would be lower (the health care increase) because of lower utilization.”
What the big increase in health care costs is not due to, he emphatically said, is the Affordable Care Act, also known as health care reform or Obamacare. Most of the major provisions of the care act will not kick in until 2014, he noted, and only 1-1.5 percent of this year’s increase is due to covering more younger Americans up to age 26.
Now in its 13th 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 2011 and included 3,184 randomly selected, non-federal public and private firms with three or more employees (2,088 of which responded to the full survey and 1,096 of which responded to a single question about offering coverage).
Some other survey findings include:
- Some 56 percent of covered workers are in “grandfathered” plans as defined under health reform. Grandfathered plans are exempted from some health reform requirements, including covering preventive benefits with no cost sharing and having an external appeals process. To obtain this status, employers cannot make significant changes to their plans that reduce benefits or increase employee cost.
- Offer rate. The share of firms offering health insurance to their workers is 60 percent this year, comparable to the levels in 2009 and earlier years. Last year’s survey found an unexplained sharp increase in the share of the smallest firms (3-9 workers) offering coverage, boosting the overall offer rate; this year’s results suggest that the one-year bump did not reflect a change in the long-term trend.
- Cost-sharing for office visits and drugs. Covered workers facing co-payments for in-network physician office visits on average pay $22 for primary care and $32 for specialty care. For covered workers with three- and four-tier drug plans, average co-payments are $10 for generic drugs, $29 for preferred brand-name drugs, $49 for non-preferred brand-name drugs, and $91 for specialty drugs.
- Retiree health benefits. Among large firms (200 or more workers), about one in four (26 percent) offer retiree health benefits in 2011, unchanged from last year and down significantly from 32 percent in 2007.
You can find the complete survey here. It’s well worth reading if you manage health care costs — either for your company, your family, or both.