Good News: Health Care Inflation Down; Employers Offering Insurance Up (But You Won’t Hear It Anywhere Else)

The Kaiser Family Foundation has released its annual survey of employer benefit plans. Gary Claxton, John Gabel and others summarized the findings in an article published in Health Affairs. There is a wealth of interesting information here.

Starting with overall trends, the study finds that employer health care costs rose a mere 5% from 2007 to 2008, and that the percentage of employers offering coverage rose from 60% in 2007 to 63% in 2008. In fact, the rate of cost increases has been dropping every year since 2003 to the point that it is very close to the rate of increase in overall inflation and workers earnings in 2008. And the percentage of employers offering coverage is the highest since 2004.

These are both very good news, worthy of banner headlines.

One of the contributing factors to these trends has got to be the rise of Consumer Driven Health Care. The survey finds that 13% of all employers now offer a Consumer Driven Health Plan (CDHP), up from 10% in 2007 and 7% in 2006, and that 8% of all workers are now covered by such a plan. While CDHP enrollment grows, HMO enrollment has declined from 26% in 2004 to 20% in 2008. And no wonder – the premium advantage of a consumer driven plan is dramatic. Below are the annual family premiums for the different forms of coverage.

• HMO – $13,122
• PPO   – $12,937
• POS   – $12,330
• HRA  – $11,571
• HSA  –   $9,101

For single coverage the annual premium is –

• HMO – $4,754

• PPO     – $4,802
• POS     – $4,647
• HRA    – $4,468
• HSA    – $3,527

Now, obviously it is easy to lower premium by raising the deductible, so it is not surprising that these premiums should be lower. But PPO deductibles are also increasing to the point that they are not very far from a CDHP deductible any longer. This survey finds that PPO deductibles rose from $461 in 2007 to $560 in 2008 for singles and from $1,040 to $1,344 for families. And, of course, there is considerable other cost-sharing on top of that in the form of co-payments and co-insurance.

Also, employers contribute significantly to a worker's account to offset the deductible. The average employer contribution to an HRA is $1,249 for a single and $2,073 for a family. Twenty-eight percent of employers with HSA coverage make no contribution to the worker's HSA, but those that do contribute $1,139 for singles and $2,067 for families on average.

Print