The price of health: insurance premiums still no deal
Health insurance premium growth for workers who get coverage through their employers slowed for the third year in a row in 2006 to 7.7 percent, according to a study of employer health benefits released today. But workers are still paying more than they can comfortably afford, the study authors argue, since the increase, which covers both employer and employee premium contributions, is more than double the 3.5 percent rate of inflation and easily outstrips worker earnings growth of 3.8 percent.
"Nobody should be celebrating, because healthcare costs are still going up much faster than wages and much faster than the rate of inflation," says Drew Altman, president and CEO of the Kaiser Family Foundation, which conducts the annual Employer Health Benefits Survey of more than 2,000 employers in conjunction with the Health Research and Educational Trust. In the face of premium increases of 87 percent since 2000, he says, "this reduction in premium growth is pretty darn meaningless."
The survey found that the average annual premium for a health plan covering a single worker was $4,242, while the cost for family coverage was $11,480. Most workers pay a part of their premium: on average, $627 for single coverage and $2,973 for family coverage. Workers at smaller firms typically pay significantly more than those at larger firms.
In addition to premium increases, other cost sharing like copayments for office visits and prescription drugs continued to inch up. For example, while 60 percent of covered workers had a $10 copayment for doctor's office visits in 1999, only 21 percent had copayments that low in 2006. Prescription drug cost tiering, in which employees pay the least for a generic drug but more for name brands, continues to increase: Nearly three quarters of workers with employer coverage are in plans with three or more tiers of cost sharing, compared with just 27 percent in 2000.
The survey also found that despite the political hype surrounding them, health savings accounts (HSAs)–high-deductible plans with a savings account attached to which either the employer or the employee (or both) may contribute–haven't caught on to any great degree. Just 7 percent of employers offer plans that are compatible with either HSAs or health reimbursement arrangements (HRAs), and only 10 percent of employers say they are very likely to offer one next year. "This is hardly an idea that has taken the employer market by storm," says Altman. Although it's too soon to know whether these plans will catch on in the long term, Gary Claxton, Kaiser vice president and coauthor of the study, says that employers may be discovering that the consumer-driven plans aren't saving them as much money as they'd hoped.
Mohit Ghose, a spokesperson for America's Health Insurance Plans, a health insurance trade group, says that consumer-driven plans are particularly appropriate for certain types of employers and individuals. "Close to 30 percent of individuals who are purchasing HSA-compatible products were previously uninsured," he says. Another third of those buying HSA-compatible products are businesses, many of them small businesses, that had previously been unable to afford to offer insurance, says Ghose.
Whatever the long-term prospects for consumer-driven plans, to date they've been unsuccessful at making a dent in the ranks of the uninsured, which grew by 1.3 million in 2005 to 46.6 million. "The hope of consumer-driven health plans hasn't taken off, despite a push to try to get that to be a magic answer for healthcare costs," says Mary Pittman, president of HRET.
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