Kaiser Report: Moderate Premium Increases in 2013

Starting when the economic conditions worsened significantly in 2009 and continuing throughout the subsequent slow recovery, healthcare cost increases have slowed. Delivery and payment reforms have contributed to the trend, as have people being more frugal with their money and less willing to visit the doctor or fill prescriptions.

Insurance premium increases have also been moderate by historical standards. In 2013, the average annual premium for employer-sponsored family health coverage rose 4% to $16,351 and single coverage premiums were up 5% to $5,884, according to the 15th annual Kaiser Family Foundation/Health Research & Educational Trust survey of 2,067 randomly selected employers.

Still, Kaiser Family Foundation president and chief executive officer Drew Altman, PhD, said that more people are enrolled in high deductible plans and are being asked to share in more of their health costs, so they are not aware of the slowing premium increases. Over the long term, wages have not kept up with premiums, adding to the difficulties people have affording healthcare.

Since the survey began in 1999, premiums are up 182% and workers’ contributions to premiums have increased 196%. Meanwhile, workers’ earnings have only increased 50% and inflation has risen 40%.

“Even though we are seeing a very moderate increase [in premiums] this year, that is not necessarily the public’s perception of what is going on,” Dr. Altman said. “People still feel the pain of healthcare costs and worry about paying their healthcare bills.”

The survey, which was conducted via telephone between January 2013 and May 2013, included responses from nonfederal public and private companies with 3 or more employees. It found a discrepancy between large and small companies with 45% of firms with 3 to 9 workers offering health benefits compared with 93% of companies with 50 or more employees. In addition, 69% of companies in which 35% or more of its employees earned at least $56,000 per year offered health benefits compared with 23% of companies in which 35% or more of its employees earned $23,000 or less per year.

The trend toward cost sharing continued, as well. This year, 78% of workers have a general annual deductible and 20% are enrolled in high deductible plans, up from 8% in 2009. The average annual deductible is $1135, including $1715 in companies with 3 to 199 employees and $884 in firms with at least 200 workers.

“I always say it is what I see as a quiet revolution in health insurance from more comprehensive to less comprehensive [plans] with higher deductibles,” Dr. Altman said. “It has a political dimension because obviously conservatives are very upset about Obamacare but beneath the radar screen, the vision of insurance that they have always savored with much more skin in the game is the one that is coming to dominate in the marketplace.”

To control costs, companies are implementing changes to their plan designs through wellness programs, disease management programs, and high performance or tiered networks in which people receive incentives to choose providers who deliver efficient, quality care.

The survey indicated that 77% of the companies offering health benefits had offered wellness initiatives such as weight loss programs, gym membership discounts or on-site exercise facilities, biometric screening, smoking cessation programs, personal health coaching, and classes in nutrition or healthy living. Thirty-five percent of the firms indicated wellness programs were very effective, a much higher percentage than those who thought consumer-driven health plans (20%), disease management programs (22%), higher employee cost sharing (17%), and tighter managed care restrictions (8%) were very effective.

However, studies have shown that the cost effectiveness associated with wellness programs is unclear, according to Kaiser Family Foundation vice president Gary Claxton, the study’s lead author.

“In the longer run, everyone would laud the goals of trying to make employees healthier,” Mr. Claxton said. “If you look beyond health benefits in terms of getting people to stay at work and reducing time off and things like that, there is probably a little bit more room for finding cost effectiveness, but there are a lot of different studies that say different things on this.”

There are also conflicting studies on the future of health cost trends in general. Gail Wilensky, PhD, a health economist and former head of Medicare under President George Bush from 1990 to 1992, wrote in a blog post on the Journal of the American Medical Association website that health spending grew at an average annual rate of 3.9% from 2009 to 2011. It was the lowest rate in 50 years and a significant reduction from the average rate of 5.9% in the previous 10 years.

Dr. Wilensky noted it is difficult to determine how much of the slowdown was attributable to structural changes such as the introduction of accountable care organizations and shared savings programs or the increase in high deductible plans. She also noted that researchers have come to different conclusions as to whether economic conditions or payment/delivery reforms are the main reason for the slowing growth. The same uncertainty pertains to insurance premiums, according to Dr. Altman.

“If and when the moderation in premium increases we are seeing will end, that remains a debate in the field,” Dr. Altman said. “I would say no one knows for sure, and if they tell you they know, they do not know and they may have an interested point of view on that.”