Premiums for job-offered health insurance up 5% this year

Washington -- Employer-sponsored health insurance premiums increased moderately in 2008 while more employees faced higher deductibles and opted for consumer-directed health plans.

Premiums for workers increased on average by 5% this year, a growth rate 1.1% slower than seen in 2007, according to an annual employer benefit survey released Sept. 24 by the Kaiser Family Foundation and Health Research & Educational Trust, a health care research organization. But this relatively modest growth was offset by a move toward increased employee cost-sharing and more limited benefits, according to the study's authors.

"There is not one story, but there are several different stories here," said Drew Altman, PhD, president and CEO of the Kaiser Family Foundation.

The average annual cost of a family plan in 2008 was $12,680, or $574 more than last year. Annual single coverage cost $4,704, an increase of $225. The survey was based on interviews with nearly 2,000 firms conducted from January to May.

The faltering economy, a lack of new blockbuster drugs and increased cost-shifting to employees helped slow premium growth, the report found. For example, 18% of all covered workers in 2008 enrolled in a plan with a deductible of $1,000 or more, up from 12% in 2007. Thirty-five percent of employees at small businesses -- those with three to 199 workers -- were responsible for paying the first $1,000 of their health care costs, up from 21% in 2007.

Employer-sponsored plans also were increasingly likely to have different deductibles, co-pays and spending cap arrangements today than they did several years ago.

Costs can vary if a patient goes out of network for hospital coverage or sees a specialist instead of a primary care physician, said Gary Claxton, director of the Kaiser Family Foundation's Health Care Marketplace Project. "It's much harder now to get a grasp of what these plans are through a survey."

Claxton expects increased employee cost-sharing to continue, in part because the slow economy puts workers in a tough bargaining position.

Altman also expects premiums to increase more quickly in the future. "There's no evidence that we've done much, if anything, to deal with the fundamental underlying drivers behind the rates of increase we have in health care costs."

Higher costs ahead

An annual survey of health plans released Sept. 22 by Hewitt Associates, a human resources consultant, predicts a 6.4% average increase in health care costs in 2009. Its estimates are based on a cost and performance analysis database of more than 1,800 health plans throughout the U.S.

Karen Ignagni, president and CEO of America's Health Insurance Plans, said her association has a strategy for further controlling premium hikes. AHIP supports providing patients and their doctors with more information about the cost-effectiveness of drugs, treatments and medical technology; expanding wellness, disease management and care coordination; and investing in health information technology to reduce medical errors and improve efficiency.

A recent poll shows that voters are still worried about health care costs, Altman said, likely in part because average health plan premiums more than doubled between 1999 and 2008. Twenty-four percent of more than 1,500 adults in the August Kaiser Family Foundation Health Tracking Poll said they had a serious problem paying for health care coverage.

More employee responsibility

Larger employers were more likely to offer high-deductible health plans this year, but small business employees were more likely to enroll in them, the Kaiser/HRET survey found.

Overall, 8% of covered employees enrolled in high-deductible health plans this year, up from 5% in 2007. These were plans with a deductible of at least $1,000 for single coverage and $2,000 for family coverage. Plans designated as HDHPs also must offer the option of establishing health savings or reimbursement accounts.

HDHPs offer less expensive premiums than the other major plan types: $10,121, on average, for family coverage in 2008. But proponents and detractors fiercely debate the plans' overall effects on health spending and the health of their enrollees.

Large employers -- those with 200 or more workers -- were more likely than smaller firms to offer wellness programs, the Kaiser/HRET report found. Nearly 90% of large businesses' health plans -- but just more than half of small firms' plans -- offered programs such as weight loss assistance, smoking cessation or nutrition classes.

Large employers are confident that wellness programs can reduce health care spending, but research has not yet confirmed that view.

"The peer-reviewed literature would not be so optimistic and upbeat about these programs improving health and particularly reducing costs," said Jon Gabel, senior fellow at the National Opinion Research Center.

But many wellness programs are new, and employers believe they will bear fruit over time, said the Kaiser Family Foundation's Claxton.