A Kaiser/HRET survey finds that while premium increases slowed this year, they’re still rising at a rate more than double that of inflation.
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| Cynthia Hedges Greising | Samantha Hawkins |
Annual surveys conducted by the Kaiser Family Foundation and the Health Research & Educational Trust show how premiums, the rate of coverage and the availability of employer-sponsored health benefits have changed. Of particular concern has been the burden of increases in premium amounts and in out-of-pocket costs of employer-sponsored health plans on employees.
Premiums Outpace Workers’ Wages
In the 2007 Kaiser/HRET survey, premiums for employer-sponsored health insurance increased an average of 6.1 percent. Although this increase is slightly lower than the increase in 2006 of 7.7 percent, this figure is still higher than the rate of increase of workers’ wages, which was 3.7 percent, or the overall inflation rate, at 2.6 percent. Interestingly, the 6.1 percent increase in premiums this year was the slowest rate of premium growth since 1999, when premiums rose only 5.3 percent. Since 2001, premiums have increased 78 percent, while workers’ wages have gone up only 19 percent and the rate of inflation has increased 17 percent.
While the rate of premium increases for health insurance is only in single digits this year, it is still more than double the rate of inflation. The slower rate of premium growth provides little relief for many U.S. workers who are already struggling with overall inflation rates while experiencing incomparable increases in salaries. The burden of affordability unfortunately hits the most vulnerable population, such as lower-wage workers and employees of small firms. Workers’ decisions to take up their employer’s health plan is based largely on affordability. If workers cannot afford the rising cost of health insurance, they find themselves and their families among the millions of uninsured.
The average premium cost for family health coverage in 2007 is $12,106. The actual cost to the worker is $3,281. Over the past six years, the amount paid by families for premiums has increased by about $1,500.
Workforce Coverage Holds Steady
The percentage of the workforce covered by employer-sponsored health plans has remained relatively steady. In 2007, 60 percent of employers offered health benefits to at least some of their workers, a 1 percent increase from last year. Overall, these figures have decreased since 2000, when 69 percent of employers offered health benefits. Nearly all, or 99 percent, of large businesses with at least 200 workers offer health benefits to their workers, but fewer than half, or 45 percent, of the smallest firms, with three to nine workers, do so. That rate has dropped from 57 percent in 2000.
Consumer-Driven Plans Show Little Growth
In recent years, more employers have offered consumer-driven plans, which typically feature a high-deductible plan and a tax-preferred savings option, from which employees can pay for their out-of-pocket medical expenses. These plans are called consumer-driven as people pay directly for a greater share of their health care and may have an incentive to minimize those costs. Such plans also may help consumers choose providers based on cost and quality.
The 2007 survey found that consumer-driven plans cover about 5 percent of all covered workers, up from 4 percent in 2006. About 3.8 million workers are enrolled in consumer-driven plans, and 10 percent of employers offered these plans to their workers, up from 7 percent in 2006.
Other Benefits Offered by Employers
Survey findings also show that nearly half, or 47 percent, of all employers that offer health benefits make these benefits available to unmarried opposite-sex domestic partners, and almost 37 percent offer these benefits to same-sex partners. Small employers, with three to 199 workers, are more likely to offer domestic partner benefits—47 percent do so—than large employers, with at least 200 workers, at 28 percent.
In addition, the majority (57 percent) of covered workers are enrolled in preferred provider organization (PPO) plans. Health maintenance organizations (HMOs) make up only one-fifth of covered workers, followed by point-of-service (POS) plans with 13 percent. Consumer-driven plans and conventional plans make up 13 percent and 3 percent of covered workers, respectively.
Premiums Expected to Rise in 2008
The news is not good for workers in the next year. Over 65 percent of employers indicate they are “very likely” or “somewhat likely” to raise the contribution amounts to premiums for their workers in 2008. Not only are workers faced with increased premium amounts, their out-of-pocket amounts are expected to increase as well. Approximately 42 percent of employers indicate they are “somewhat likely” to increase office visit cost-sharing. Over one-third of employers indicate they are somewhat likely to raise deductibles in the next year, and 41 percent say that they are “somewhat likely” to increase their prescription drug cost-sharing as well.
Cynthia Hedges Greising is staff writer and Samantha Hawkins is research manager, both at the Health Research & Educational Trust. For a copy of the complete 2007 report, please visit www.hret.org.
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