Benefits, HR News & Trends

Survey: Family Health Premiums Up Just 4%, Still Outpace Wage Growth

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Health care costs moderated considerably in 2012, rising by a relatively modest 4 percent, according to the Kaiser Family Foundation/Health Research & Educational Trust 2012 Employer Health Benefits Survey released today.

Kaiser’s annual survey shows that annual premiums for employer-sponsored family health coverage increased to $15,745 this year, up from $15,073 last year, with workers on average paying $4,316 toward the cost of their coverage.

Premiums for single employees increased a bit less, by 3 percent, with the total cost reaching $5,615 annually (it was $5,429 in 2011). Single workers, on average, will pay $951 this year toward their coverage.

The 2012 premium increase, the survey analysis notes, is moderate by historical standards (they increased 9 percent last year) but outpaced the growth in workers’ wages (1.7 percent) and general inflation (2.3 percent). Since 2002 — the last decade — premiums have increased a whopping 97 percent, three times as fast as wages (33 percent) and inflation (28 percent).

A “4% increase qualifies as a good year”

“In terms of employee insurance costs, this year’s 4 percent increase qualifies as a good year, but it still takes a growing bite out of middle-class workers’ wages, which have been flat or falling in real terms,” Kaiser President and CEO Drew Altman, Ph.D. said in a press release about this year’s survey.

The 14th annual Kaiser/Health Research & Educational Trust survey of more than 2,000 small and large employers provides a detailed picture of trends in employer-sponsored health insurance costs and coverage. Part of the survey’s focus this year is on the differences in the benefits and worker contributions toward family premiums between organizations with many lower-wage workers (at least 35 percent of workers earn $24,000 or less a year) and firms with many higher-wage workers (at least 35 percent of their workers earn $55,000 or more a year).

Here is some of what the Kaiser survey found in this regard:

  • Workers at lower-wage organizations on average pay $1,000 more each year out of their paychecks for family coverage than workers at higher-wage firms ($4,977 and $3,968, respectively). This occurs even though the organizations with many lower-wage workers, on average, pay less in total premiums for family coverage than firms with many higher-wage workers ($14,694 and $16,427, respectively).
  • Workers at lower-wage organizations are also more likely to face high deductibles than those at higher-wage firms. Specifically, 44 percent of covered workers at organizations with many low-wage workers face an annual deductible of $1,000 or more, compared with 29 percent of those at firms with many high-wage workers. Across all employers, a third of covered workers (34 percent) face a deductible of that size, including 14 percent with deductibles of at least $2,000 annually.

“This year’s survey suggest that working families at the low end of the wage scale face significant out of pocket costs for coverage,” said study lead author Gary Claxton, a Kaiser Vice President and director of the Foundation’s Health Care Marketplace Project, in a press release about the survey. “Firms with many lower-wage workers ask employees to pay more out of pocket than firms with many higher-wage workers even though the coverage itself tends to be less comprehensive.”

Health reform and employers

The Kaiser survey estimates that 2.9 million young adults are currently covered by employer plans this year as a result of a popular provision in the 2010 Affordable Care Act that allows children up to age 26 without employer coverage of their own to be covered as dependents on their parents’ plan. That’s up from the 2.3 million in the 2011 Kaiser survey. Young adult children, according to Kaiser, have historically have been more likely to be uninsured than any other age group.

The survey also found that 48 percent of covered workers are in “grandfathered” plans as defined under health reform act, down from 56 percent last year. Grandfathered plans are exempted from some health reform act requirements, including covering preventive benefits with no cost sharing and having an external appeals process. To retain this status, employers must not make significant changes to their plans to reduce benefits or increase employee costs.

Employer expectations for 2013

In addition to the comprehensive survey conducted by Kaiser and the Health Research & Educational Trust in the spring, employers were asked in August 2012 (last month) if they had any information about the change in premiums (or total cost for self-funded plans) for their current health plan with the largest enrollment. The average increase reported by employers who had received information for their current plan is 7 percent.

Kaiser’s analysis: These early reports may not match what employers and workers ultimately end up paying next year, as organizations can raise deductibles or otherwise change the health benefits and plans they offer to lower premiums (as a National Business Group on Health study last month made clear). This year, for example, more than half (54 percent) of employers who offer health benefits reported that they had shopped around for new coverage. Of that group, a significant number switched carriers (18 percent) or changed the type of plans they offer (27 percent).

During the media conference call to discuss the 2012 Employer Health Benefits Survey, Kaiser’s Dr. Drew Altman said that one of the big questions is whether premium increases (and costs) will jump back up after this year’s relatively moderate 4 percent increase. He pointed the media to a column he wrote to go along with the survey where he said:

Rates of increase in total health spending have been holding at 4-6 percent per year recently, and per capita spending — which is most analogous to premiums — has been rising about a percentage point below that. These are strikingly low numbers to those of us who have been studying health costs for a long time. A 4 percent increase in health premiums is good news, although good news is seldom “news.” But will it last?

No one has yet been able to disentangle the causes of the slowdown persuasively. Health care use and the economy have always been closely tied, and my sense is that the recession and slow recovery are responsible for much of the recent health spending and premium trends. Increases in recent years in cost sharing through high deductible plans have probably played a supporting role. In tough times, when wages are flat, people avoid using the health care system if they can. We also know that higher out-of-pocket costs deter utilization, so it’s reasonable to assume that the growth of high-deductible plans and other forms of cost sharing has had an impact on health care use, magnifying the effect of the economy.”

Other survey findings

Now in its 14th year, the 2012 Employer Health Benefits Survey is a joint project of the Kaiser Family Foundation and the Health Research & Educational Trust. The survey was conducted between January and of 2012 and included 3,326 randomly selected, non-federal public and private firms with three or more employees (2,121 of which responded to the full survey and 1,205 of which responded to a single question about offering coverage). For more information on the survey methodology, click here.

Other findings from the 2012 Employer Health Benefits Survey study include:

  • Employee offer (coverage) rate. This year, 61 percent of firms offer health benefits to their workers – statistically unchanged from last year.
  • Cost-sharing for office visits, emergency care and drugs. Covered workers facing co-payments for in-network physician office visits on average pay $23 for primary care and $33 for specialty care. For emergency-room visits, average co-pays are $118. For drug plans with three or more tiers, average co-pays are $10 for generic drugs, $29 for preferred brand- name drugs, $51 for non-preferred brand-name drugs, and $79 for specialty drugs.
  • Domestic partner benefits. In 2012, 31 percent of employers offer health benefits to same- sex domestic partners, up from 21 percent three years earlier. This year, 37 percent of firms offer such benefits to unmarried opposite-sex partners, up from 31 percent in 2009.
  • Flexible Spending Accounts and Pre-Tax Premiums. Large employers are more likely than small ones to allow workers to pay their share of premiums with pre-tax income (91 percent, compared to 41 percent) and to contribute pre-tax dollars to Flexible Spending Accounts (76 percent, compared to 17 percent)

You can find the complete survey here. As I noted last year, it’s well worth reading if you manage health care costs — either for your company, your family, or both. And with so many changes coming due to health care reform, this gives you some insight into what everyone else is doing to cope, and what you might consider doing, too.

John Hollon is Vice President for Editorial of TLNT.com, and the former Editor of Workforce Management magazine and workforce.com. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices. Contact him at john@tlnt.com, and follow him on Twitter at http://twitter.com/johnhollon.