Premium Increase Rate Slows in 2012

As the costs of health insurance continue to increase faster than wages or inflation, people enrolled in employer-sponsored health plans have mixed views on their coverage.

According to the Kaiser Family Foundation/Health Research & Educational Trust Employer Health Benefits 2012 Annual Survey, premiums for 2012 increased 4% from 2011 to $15,745 for family coverage and 3% to $5615 for individuals. (Table 1)

Workers with family coverage contributed an average of 28%; those with individual coverage had a contribution rate of 18% of their individual coverage. The 2012 worker contribution percentages were similar to the 2011 levels.

Results were also published online in Health Affairs [doi:10.1377/hlthaff.2012.0708]. In all, employee benefit managers from 2121 companies with ≥3 workers completed the survey from January to May 2012. The survey did not include government employees.

Drew Altman, PhD, president and chief executive officer of the Kaiser Family Foundation, said the small rate of increase was “good news,” particularly after the average annual premiums for 2011 rose 9% compared with 2010.

Gary Claxton, the study’s lead author, hypothesized that the 2011 increase was higher than usual because companies thought the economy would recover and healthcare utilization would increase. Employers, predicting higher health costs last year, offset that with premium increases. However, in reality, the economy remained weak and utilization was stagnant.

Despite the modest increase in 2012, Dr. Altman said long-term trends are “largely unchanged.” Since the survey’s inception in 1999, premiums have increased 172% and workers’ contributions to premiums have increased 180%. During that same period, workers’ earnings rose 47% and inflation rose 38%. In 2012, premium increases were higher than the rise in wages (1.7%) and inflation (2.3%).

In recent years, the increases have been more modest. From 2002 through 2007, the cumulative increase in family premium increases was 51%, but that dwindled to an increase of 30% from 2007 through 2012.

Some have speculated that poor economic conditions and the Patient Protection and Affordable Care Act (ACA) have played a role in keeping costs somewhat in check. With unemployment above 8%, people fearing they will lose their jobs, and more workers enrolled in high-deductible plans, there has been some conjecture that healthcare utilization has decreased, contributing to lower premium increases.

However, the study did not examine why the increases have slowed, and the authors said no one has a definitive answer to explain this trend.

“Lots of people are trying to find ways to explain it,” said Mr. Claxton, director of the Kaiser Family Foundation’s healthcare marketplace project. “They could get really rich if they could.”

Mr. Claxton said the ACA did not likely have much of an impact, because most major provisions will not be enacted until 2014. In addition, the ACA allows plans to be grandfathered from some of its provisions, such as the requirement to cover preventive benefits without cost sharing and to have an independent appeal process, if the plan provided coverage to a worker when the act became law and did not make major reductions in benefits or implement cost increases. The authors noted that 48% of workers in 2012 were enrolled in grandfathered plans compared with 56% in 2011.

Another provision already in place is the option for families to keep adult children on their insurance plan until the children are 26 years of age, which has led to an additional 2.9 million adult children gaining coverage, up from 2.3 million in 2011. The difference was statistically significant.

If the ACA is fully implemented, small firms will likely be affected more than large firms, according to Mr. Claxton, because they will have to provide better benefit packages and cover more workers.

The survey defined small firms as those with 3 to 199 employees, and found that workers with single coverage at small companies contributed a similar percentage of premiums to those at large firms (16% vs 18%). However, people at small firms who had family coverage paid for 35% of their premiums, a statistically significant increase compared with the 25% that workers at large firms contributed.

In 2012, 61% of firms offered their workers health benefits, a similar percentage to recent years except for 2010, which the authors said may have been a statistical aberration. However, in the last decade, employees have become more likely to be in partially or completely self-funded plans. During that same time period, the percentage of large firms offering retirees health benefits has decreased. (Table 2)

High-deductible plans with a health reimbursement arrangement or a health savings account continue to be more prevalent, accounting for 8% of covered workers in 2009, 13% in 2010, 17% in 2011, and 19% in 2012. The authors considered high-deductible plans as those with deductibles ≥$1000 for single coverage or ≥$2000 for families. In small firms, 49% of employees had deductibles ≥$1000 compared with 26% of those in large firms.

Preferred provider organizations were the most popular option (59% of workers) in 2012, while 16% were enrolled in health maintenance organizations, 9% in point-of-service plans, and <1% in indemnity coverage.

Meanwhile, satisfaction levels among people in traditional health plans are decreasing, although they are more popular than consumer-driven or high-deductible plans, according to a report from the nonpartisan Employee Benefit Research Institute (EBRI).

The EBRI survey included people enrolled in consumer-driven, high-deductible, or traditional health plans. The consumer-driven group had deductibles ≥$1000 for individual coverage or ≥$2000 for families plus a health savings account or health reimbursement arrangement to pay for medical expenses that they could take with them if they switch jobs. The high-deductible group had the same deductible restrictions as the consumer-driven group but did not have the other accounts. People enrolled in the traditional plans had no deductibles or deductibles that were below the limits to qualify for a health savings account tax preference.

In 2012, 57% of people enrolled in traditional plans said they were extremely or very satisfied with their plans, down from 60% a year earlier. It was still higher than for other workers, though: 37% of those in high-deductible plans and 46% in consumer-driven plans indicated they were extremely or very satisfied, which were up 35% and 43%, respectively, from a year earlier.

With high-deductible plans increasing, people enrolled in them are not as satisfied with their coverage as others. Only 29% of those in high-deductible plans said they would be extremely or very likely to recommend their plan to co-workers or friends compared with 49% of those in traditional plans and 41% of those in consumer-driven plans. In addition, 34% of high-deductible enrollees, 49% of consumer-driven enrollees, and 58% of traditional plan enrollees said they would be extremely or very likely to stay with their plan if they had an option to change.