Total premiums for employer-sponsored family health coverage have reached $15,073, up 9 percent from last year, the Kaiser Family Foundation and the Health Research and Educational Trust reported yesterday in their annual Employer Health Benefits Survey. This sharp rise comes after a string of comparatively mild increases. Last year, family premiums increased 3 percent, after three years of 5 percent increases.
On yesterday’s PBS NewsHour, Health Affairs Editor-in-Chief Susan Dentzer addressed the question of what’s behind this large increase. She emphasized the issue of underlying health care costs:
One issue clearly is that we just have more chronic disease. Chronic disease cost is driving about 75 percent of our total health spending as a country. We have now lots of diabetes, lots of cancers that are now considered increasingly a chronic disease. And, of course, the biggest one is cardiovascular disease.
We know that we pay more than other countries in terms of prices for health care. So that’s causing some of the increase. And, in fact, there was an increment in drug price inflation that fed into the price increase.
Dentzer said that rising underlying health care costs were a bigger influence than insurer price increases. Firms that “self-insure” – that pay health care costs out of their own pockets – saw costs go up just as fast as firms with traditional insurance policies. “So that’s what tells you that it’s really not insurance that is driving most of this increase right now,” she said.
Will large increases continue? There may be some reason for optimism that this year’s increase will be an anomaly rather than the start of a new era of higher increases. Dentzer noted a White House Blog post noting that costs for the Federal Employees Health Benefits Plan will go up only about 3.8 percent in 2012. “We’re seeing a mix of signals. This Kaiser survey is looking back over the last year. When we look forward, we see some downward pressure on health spending that could actually be quite beneficial,” Dentzer said.
“It appears that insurers and self-insured plans assumed a faster economic recovery and geared their premiums this year to larger increases in utilization than have in fact occurred. Another way of saying that is they assumed a return to more normal levels of utilization, and that didn’t occur,” Kaiser President Drew Altman said in a phone briefing on the Kaiser/HRET survey. Altman said he would “guess” that next year’s premium increase would be lower, in line with the slowing recovery and actual utilization, but he stressed the uncertainty in that prediction.
What was the impact of the Affordable Care Act? Both Dentzer and Altman said the landmark health reform legislation passed in 2010 was a fairly minor, amounting to 1-2 percentage points out of the 9 percent premium increase. Altman said this stemmed from the costs of providing certain prevention benefits without cost-sharing and of allowing young-adult children – who Dentzer noted are “some of the cheapest people to insure” — to stay on their parents’ plans as dependents until they turn 26. Much of the new law will not be implemented until 2014, and 56 percent of covered workers are in “grandfathered” plans that are exempt from some of the law’s requirements, including the new prevention mandates.
The Kaiser/HRET survey found that employers added 2.3 million young-adult children to their parents’ plans, which HRET president Maulik Joshi called “a real implementation success story.”
The “quiet revolution” of high-deductible plans. One of the most striking elements of the report was the increasing prominence of high-deductible health plans (HDHPs) – with deductibles exceeding $1,000 for single coverage and $2,000 for family coverage – and particularly high-deductible plans linked to tax-preferred savings options (HDHP/SOs) such as Health Reimbursement Arrangements and Health Savings Accounts. The percentage of covered workers in HDHP/SOs rose from 13 percent in 2010 to 17 percent this year and has more than tripled since 2006. Thirty-one percent of all covered workers face deductibles of $1,000 or more; in smaller firms, with 3-199 workers, have of all covered workers face such deductibles, and 28 percent face deductibles of $2,000 or more.
Altman said he expected the trend to continue, at least in the short-term. “I would expect to see more high-deductible plans, with higher and higher deductibles in the high-deductible plans. That seems to be the biggest tool in the toolbox employers have to hold premiums down, and it’s a clear trend in our survey year after year.” Altman called this “the quiet revolution going on in health care.” You can debate whether it’s good or bad, he said, but — as Washington is focused on cutting Medicare and Medicaid — “the nature of what we call health insurance is changing without a great deal of analysis and debate.”