Costs Of Employer Insurance Plans Surge in 2011
By Julie
Appleby
KHN Staff Writer
Sep 27, 2011
Employers' spending on health coverage for workers spiked abruptly this year,
with the average cost of a family plan rising by 9 percent, triple the growth
seen in 2010.
Family plan premiums hit $15,073 on average, while coverage for single
employees grew 8 percent to $5,429, according to a survey released Tuesday by the
Kaiser Family Foundation and the Health Research & Educational Trust. (KHN
is an editorially-independent program of the foundation.)
Workers paid an average of $921 toward the premium of single coverage and
$4,129 for family plans.
The results mark a sharp departure from 2010, when the same survey found
average family premiums up only 3 percent.
Although many benefit analysts say the federal health lawfs requirements
played only a small part in the rise, the results could provide political fodder
for both supporters and opponents of the law.
"It's problematic," says Democratic pollster Celinda Lake, because the No. 1
concern cited about the health law is a fear that it will increase costs. Still,
Lake notes that many Americans don't know much about the law, so the news of
rising premiums "could also fuel support for provisions in the law that require
insurance premiums of 10 percent or more to be reviewed."
Premium increases have played a starring role throughout the debate over the
health care law.
Before the law's passage in 2010, for example, insurer WellPoint's effort to
raise rates by as much as 39 percent for some of its California
customers drew sharp rebukes from the Obama administration and helped
build support for the law in Congress.
Proponents of the law also point to this spring's decision by Aetna to lower premiums for individual policies in
Connecticut as an effect of the health law. Responding to the report, the
White House weighed in with a blog post from Nancy-Ann DeParle, the assistant to
the president and deputy chief of staff. She said provisions of the law are already beginning to slow premiums, pointing to another report
released today by the Office of Personnel Management saying average premiums for
the Federal Employees Health Benefits (FEHB) program will increase by 3.8
percent next year. Premiums increased 7.3 percent this year.
But opponents say the law adds costly new mandates – and has not shown
results yet.
"Despite the president's repeated promises that the Democrats health care law
would lower the cost of health insurance, employers are still facing higher
health costs," said Ways and Means Health Subcommittee Chairman Wally Herger,
R-Calif., in a written statement Friday.
Many factors drive premium growth, the main one being actual spending on
medical care, including jumps in prices charged by hospitals and doctors and
growing use of expensive new drugs and technologies. State regulators have
widely varying authority over premium increases for policies sold to individuals
and small businesses. Currently, 26 states and the District of Columbia have the
authority to veto rates deemed excessive for at least some types of health
insurance. Additionally, seven states have the power to review rate increases in advance
but not to block them.
Over the past decade, premiums have risen steadily, with double-digit
increases seen from 2000-2004, the Kaiser survey and other tracking reports
show. Growth in premiums moderated starting in 2006, averaging about 5 percent
for several years, the survey found.
The benefits firm Mercer reported earlier this year that per-worker health
spending by employers rose at about 6 percent annually for about the past five
years, rising to nearly 7 percent last year. Projecting future increases is
harder, as many surveys estimate based on initial negotiations between insurers
and employers, before changes to benefits are made to slow premium costs. In a
study out
last week, Mercer projected that employers may see their health spending
rise 5.4 percent next year, while a similar survey released in May by accounting firm PwC
estimated an 8.5 percent rise next year.
Insurers often set rates well before they go into effect, using data to
estimate coming expenses, including how much policyholders are expected to use
medical services. Analysts have noted a slowdown in doctor office visits, births
and elective surgeries they say is related to the economy.
One factor in this year's increases was that "employers and insurers expected
a faster economic recovery and geared premiums to higher levels of utilization,"
says Drew Altman, president and CEO of the Kaiser Foundation.
The growth of premiums far outpaced the growth in workers' wages – as it has
for the past decade. Wages grew by 2 percent this year.
Although premiums rose, employers kept the percentage of the premium workers
pay about the same: An average of 18 percent for single coverage and 28 percent
for family plans. Still, with rising costs, workers paid more, up an average of
$132 a year for family coverage. Since 1999, the dollar amount workers
contribute toward premiums nationally has grown 168 percent, while their wages
have grown by 50 percent, according to the survey.
The results from Tuesday's survey were drawn from the responses of more than
2,000 large and small businesses. The survey was done from January to May – well
before the September start date of a rule requiring states to scrutinize rate
increases of 10 percent or more for policies sold to individuals and small
businesses.
Other provisions of the federal law were in effect, including those that
allow parents to keep their children on their coverage until age 26, a ban on
lifetime benefit limits and a requirement that preventive services, such as some
cancer screenings, be offered without co-payments. Insurers are also barred in
most cases from canceling policies of those who fall sick.
Altman said the
foundation's research found that current rules in effect "could only have had a
modest impact on premiums,h accounting for about 1.5 to 2 percentage points of
the 9 percent increase. Other surveys, including a government analysis, also
estimated the early rulesf effect on premiums in a similar range.
Michael Thompson, a principal at PwC, said his work with employers found that
the new provisions had a negligible effect on premium costs, often because
employers were already making benefit changes that shifted more costs to workers
in order to slow premium growth.
The one provision of the new law that "had an almost universal impact" on
employers was the one allowing parents to keep their adult children on their
policies, Thompson said, although "interestingly it didn't necessarily raise
their per-head cost (because young people don't cost as much to insure)."
Based on employer responses, the Kaiser survey estimated that employers added
2.3 million young adults to their coverage. Last week, the governmentfs National Center for Health Statistics found that the number of
uninsured people ages 19 to 25 dropped by almost 1 million in the first three
months of this year.
Premiums – and increases – vary widely around the country. Average increases
for small businesses in Maine, for example, rose 17 percent this year, according
to state data. Regulators in Oregon, meanwhile, approved small business
increases ranging from zero to 15.6 percent, depending on the insurer. This
month, Kaiser Permanente in California told 360,000 small businesses that it
would reduce their already-in-effect increases by 1.2 percent immediately,
following discussions with regulators. (KHN is not affiliated with Kaiser
Permanente.)
Marge Kraskouskas, vice president of human resources for the Hockomock Area
YMCA in North Attleboro, Mass, says ten years ago, family coverage cost her firm
$567 a month; now itfs $1,455.
Her rates rose 7 percent this year, "one of the lowest increases in years,"
she said. "Still, I don't care if you're talking 7 percent or 13 percent, it's a
killer in the budget."
The premium report is gjust the latest warningh that more needs to be done to
address rising health care costs, said a statement from Karen Ignagni, president
and CEO of Americafs Health Insurance Plans, the industry lobbying group.
State and congressional lawmakers need to focus not just on insurers, but all
the factors driving rising premiums, she said, including gsoaring prices for
medical services, changes in the covered population that have resulted in an
older and sicker risk pool, and new benefit and coverage mandates that add to
the cost of insurance.h
© 2011 Henry J. Kaiser Family Foundation. All rights
reserved.