Premiums tied to employer-based health plans rose modestly in 2015, and more companies are shifting an increasing number of employees to plans that have higher deductibles and out-of-pocket payments.
The findings come from the Kaiser Family Foundation and the Health Research & Educational Trust, which published their annual survey of employer health benefits on Tuesday. The health policy groups also discovered more than half of large employers have been analyzing the Affordable Care Act's so-called “Cadillac” tax on their high-cost health plans, and companies are putting a large emphasis on wellness incentives.
“What we're seeing is a continuation of trends we've been seeing the past few years,” said Paul Fronstin, director of health research at the Employee Benefit Research Institute, which is not affiliated with the study. “Premiums are going up modestly, but employers and employees are sharing the premium increases. Deductibles are going up, and people are paying more for services when they need them.”
A majority of Americans younger than age 65, or about 150 million people, have health insurance through their employers. The survey found the average annual premium for individual workers in 2015 rose 4% to $6,251. Family plan premiums increased by the same amount year over year, averaging $17,545 per year. Employers pay for a bulk of those costs: 83% of individual premiums and 72% of family premiums, constituting one of the largest components of labor costs.
While premiums continued their tepid growth, the deductible levels and number of employees moving to high-deductible plans grew at a much faster pace. The average deductible—the amount employees have to pay out of pocket before insurance kicks in—increased 8.3% to $1,318 for single coverage in 2015.
Overall, about 24% of workers in employer plans were enrolled in a high-deductible plan with some type of savings account in 2015, compared with 20% in 2014. Tax-exempt health savings accounts help pay down expenses at the point of service. In 2006, only 4% of employees were in high-deductible plans, according to the Kaiser and HRET survey. Smaller companies with fewer than 200 workers are more likely to offer high-deductible options.
Many experts have said rising deductibles, copayments and coinsurance rates are putting patients in tough spots. More of employees' relatively stagnant paychecks are going toward doctor visits, hospital bills and prescription drugs. While high deductibles reduce the use of potentially unnecessary healthcare, it's also creating a swelling subset of “underinsured” people who may struggle with their medical bills or who may skip care altogether to avoid paying their out-of-pocket costs.
“With deductibles rising so much faster than premiums and wages, it's no surprise that consumers have not felt the slowdown in health spending,” Kaiser Family Foundation CEO Drew Altman said in a statement, referencing the lower national health spending of the past few years.
However, economists and researchers have said higher out-of-pocket spending will force patients to be more judicious in how they receive healthcare and drive them to hospitals and physicians who provide less expensive, higher quality care. New price transparency technologies such as Castlight Health and Guroo are encouraging that shift, said Stephen Parente, a health economist at the University of Minnesota.
“Employers are trying to do as much consumer engagement as they possibly can,” Parente said. “As folks get into (high-deductible plans) and live through it and acclimate to it, they sometimes get empowered by it.”
Employers have also dabbled in value-based insurance design, which lowers out-of-pocket spending for clinically recommended services and high-quality providers. The CMS is trying a value-based insurance design project in the Medicare Advantage program.
“Pick your label. Plan design is becoming more complicated, sophisticated, innovative,” Fronstin said. “It's not just simply a cost shift.”
The Affordable Care Act did not affect much of the employer-sponsored benefit markets, as the major insurance provisions expanded access to Medicaid and overhauled the non-employer, individual market. However, the Cadillac tax is beginning to create shock waves among employers who want to avoid paying a tax on their health plans, which are currently tax-exempt. Many companies are moving toward high-deductible plans as a way to avoid the excise tax, which goes into effect in 2018, Parente said.
The Kaiser and HRET survey shows that dynamic. Roughly 53% of companies with at least 200 workers have done an analysis to see if the Cadillac tax would affect them. Almost 1 in 5 of those employers said their plans will exceed the thresholds, which equate to annual benefit values above $10,200 for individuals and $27,500 for families. The 40% tax applies to the amount over those limits.
Small employers are worried about a separate ACA provision that starts next year. Employers with at least 50 full-time workers will have to offer ACA-compliant health plans, which include all of the essential health benefits, expanding from the current definition of at least 100 employees. Companies worry they will have to raise premiums significantly, since many small employers offer coverage that doesn't meet ACA standards.
The survey from Kaiser and HRET found only 4% of companies with at least 50 employees changed job-hour requirements so those employees would not be eligible for health coverage.
Increasingly, companies are also moving toward or already have implemented wellness programs that are tied to insurance plans, according to the survey. For example, companies could offer rewards, or penalties, for people to complete health risk assessments, biometric screenings, disease management programs or some other type of wellness activity.
Smoking cessation and weight-loss programs are among the most popular for small and large employers alike, the survey found, although many industry observers argue wellness programs do little to hold down healthcare costs and improve health.