Health insurance costs employees more but covers less

In addition to paying a bigger share of premiums, employees are facing higher co-pays and annual deductibles.

By Doug Trapp — Posted Sept. 13, 2010

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Employees this year are facing double-digit increases in health insurance premiums, even though overall premiums increased modestly -- 3% for family coverage and 5% for single coverage, according to an annual employer health benefits survey released Sept. 2.

On average, workers in 2010 are paying 14% more than they paid for 2009 employer-sponsored family health insurance premiums. That pushes the average family premium to $3,997 this year, according to the 2010 Employer Health Benefits Survey, released by the Kaiser Family Foundation and the Health Research & Educational Trust. Employees' average cost for single coverage grew by 15% to reach $899.

In addition to higher premiums, the survey found a significant increase in co-pays for visits to physicians' offices, an amount that employers usually set. Employees also had to pay more out of pocket to meet deductibles before company plans began picking up the costs.

"The insurance that workers get looks less and less like the comprehensive coverage that their parents got," said Drew Altman, PhD, president and CEO of the Kaiser Family Foundation.

He said employees have been paying steadily more for health insurance for years, but the 2010 increase was unusual. "It's the first time I've seen employers shift virtually all of the cost increases to employees," he said.

Overall premiums grew relatively slowly this year, in part because the recession discouraged workers from seeking health care. But Altman said he understands the impact of the recession on employers. Many are severely limiting their health care spending to preserve jobs.

Lori Heim, MD, president of the American Academy of Family Physicians, said decisions to increase health care costs for employees are focused on the short-term bottom line of businesses, not the long-term welfare of employees, which is why the country needed the national health reform law. "If business are offering insurance, it needs to be a minimum level."

The cost shift to employees probably will mean that more patients will limit their health care spending by delaying checkups or other care, Dr. Heim said. A common example is a diabetic asking to have an annual checkup instead of seeing a physician every six months.

"Now all of a sudden they don't want to come in that often, because they don't want to pay their deductible," Dr. Heim said.

Some feared that many employers would drop mental health coverage in response to a 2008 federal law equalizing mental and physical health benefits, but that did not happen. Among firms that changed their mental health benefits in 2010, 5% eliminated mental health coverage and 67% eliminated mental health coverage limits.

Employee co-pays, deductibles up

Although physician office visit co-pays increased by only a few dollars, the figure was statistically significant and part of a several-year trend, the report found.

Co-pays for visits to primary care physicians grew by $2 to reach an average of $22. Co-pays reached $31 for specialty care on average, a $3 hike.

Many employers -- especially small firms -- increased the annual deductibles workers must pay before health plan cost-sharing kicks in, according to the report. Overall, 27% of covered workers' plans have annual deductibles of $1,000 or more in 2010, up five percentage points in just one year. Among small businesses with fewer than 200 employees, 46% of workers have deductibles of $1,000 or more.

The study's authors were surprised to find that 69% of firms offered health benefits in 2010, a nine percentage point increase from 2009. This was driven almost entirely by a sharp increase in the percentage of businesses with three to nine workers offering coverage, but that may have been a statistical anomaly, said Heidi Whitmore, study co-author and senior research scientist at the National Opinion Research Center.

"Non-offering firms may have gone out of business during the recession," Whitmore said.

High-deductible plans grow

PPOs remain the most popular plan type -- 58% of covered workers have them -- but only high-deductible plans gained a larger share of the market. Such plans have deductibles of $1,000 or more and feature savings options not subject to taxation.

The percentage of workers covered by high-deductible health plans with savings options reached 13% in 2010, an increase of five percentage points over 2009.

High-deductible plan growth was driven by large firms, those with 1,000 or more workers. Among large employers, 34% offered such plans, a six percentage point increase over 2009.

Some Democrats and consumer advocates have criticized high-deductible plans as another tool for employers and health plans to shift costs to patients. But that's oversimplifying reality, said Gary Claxton, lead author of the study and director of the Kaiser Family Foundation's Health Care Marketplace Project.

"When employers choose those plans, they are doing a little bit more than just choosing a plan with higher cost-sharing, which they can do anyway," Claxton said. "Health plans are still actively marketing consumer-driven plans as a different way to get employees engaged in their own health care."

But health plans overall might be using their market power to demand significant premium increases before new health care reform regulations go into effect, Claxton said. This could especially be true for the small and individual market, he said.

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Employees paying more

View in PDF

Click to see data in PDF.

As health insurance premiums rise, workers are paying a bigger share of the annual cost. And co-pays are going up, too: More Americans are paying co-pays of $20 or more for physician office visits than they were mid-decade. Nearly 70% of insured workers with co-pays paid $20 or more in 2010 compared with about 40% in 2004.

Source: "Employer Health Benefits 2010 Annual Survey," Kaiser Family Foundation, Health Research & Educational Trust, Sept. 2 (link)

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