Slower Rise in Health Insurance Costs as Insurers Target the Uncovered

With employer-sponsored health insurance increasing in price, the prime target for insurers is the group of workers who are not covered by these plans, according to several recently published reports.

The Kaiser Family Foundation and Health Research and Educational Trust’s annual employee health benefits survey found that premiums for employer-sponsored health insurance rose an average of 6.1 percent in 2007, less than the 7.7 percent increase reported last year but still higher than the increase in workers’ wages (3.7 percent) or the overall inflation rate (2.6 percent).

The 6.1 percent average increase this year was the slowest rate of premium growth since 1999, when premiums rose 5.3 percent. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent. 

The average premium for family coverage this year is $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy, according to the Kaiser/HRET report. 

“We’re seeing some moderation in health-cost increases, but premiums for family coverage now top $12,000 annually,” said Drew E. Altman, Kaiser president and CEO.  “Every year health insurance becomes less affordable for families and businesses. Over the past six years, the amount families pay out of pocket for their share of premiums has increased by about $1,500.”

“The number of options for low wage earners is limited and the greatest burden of all health care costs falls to this segment of the population,” added Mary A. Pittman, Health Research and Educational Trust president. “Although the economy seems to be strong, between 2005 and 2006 the total number of uninsured still rose by 5 percent, including a 9 percent increase in the number of uninsured children.”

Those are the people being targeted by the insurers, according to a recent report in The Wall Street Journal.  Major insurance companies are seeking to enroll workers in their 20s and 30s, many of whom aren’t covered by health insurance at their jobs, and older individuals who have yet to qualify for Medicare,The Journal reported. The plans offered to these consumers tend to have high deductibles and plenty of exclusions, the paper found.

Those are much like some of the consumer-driven plans offered to employees, but those plans have yet to gain much acceptance in the workplace. Overall, an estimated 3.8 million workers are enrolled in consumer-driven plans, about equally divided between high-deductible plans that qualify for a Health Saving Account (HSA) and plans with a Health Reimbursement Arrangement (HRA).

These plans feature a high-deductible plan and a tax-preferred savings option, from which employees can pay for their out-of-pocket medical expenses.  Such plans are often described as consumer-driven because people pay directly for a greater share of their health care and may have an incentive to minimize its cost.  They also may offer tools to help consumers choose providers based on cost and quality.

The annual Kaiser/HRET survey plans cover about 5 percent of all covered workers, which is not statistically different from the 4 percent share recorded in 2006.

This year, 10 percent of firms offered a consumer-driven plan to their workers, compared with the 7 percent of firms reporting this for 2006.  Firms with at least 1,000 workers are more likely to offer such plans, with nearly one in five offering one.  Looking toward 2008, few firms that don’t already offer such plans report that they are very likely to add a HRA plan (3 percent) or a HSA-qualified plan (2 percent).