Employer Health Plan Premiums Show Smallest Increase Since 2000

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Employer-sponsored health insurance premiums increased by an average of 7.7% in 2006, compared with increases of 9.2% in 2005 and 13.9% in 2003, according to an annual survey released on Tuesday by the Kaiser Family Foundation and the Health Research and Educational Trust, the New York Times reports (Freudenheim, New York Times, 9/27). For the report, researchers surveyed 3,159 employers between January and May; 2,122 employers responded to the full survey, and 1,037 additional employers answered one question about whether they offered health insurance to employees. The 7.7% increase marks the smallest rise in employer-sponsored health insurance premiums since 2000, although premiums increased at more than twice the rate of employee wages (3.8%) and overall inflation (3.5%) in 2006, the report finds (Kaiser Family Foundation/HRET/Health Affairs joint release, 9/26). Employer-sponsored health insurance premiums have increased by 87% since 2000, according to the report (Wessel, Orlando Sentinel, 9/27).

Health Insurance Premiums
The report also finds that employees in 2006 contributed an average of $259 more for family health insurance premiums than in 2005. In 2006, employees contributed an average of $2,973 for annual family health insurance premiums that averaged $11,480, according to the report (Pugh, Sacramento Bee, 9/27). Employees who worked for employers with three to 199 workers in 2006 on average contributed more to annual family insurance premiums than those who worked for larger employers, $3,550 compared with $2,658, respectively, the report finds (Day, Washington Post, 9/26). On average, employees in 2006 paid for about 16% of single health insurance premiums and 27% of family health coverage premiums, the report finds (Bowman, Scripps Howard/Detroit News, 9/27). Employee contributions for family health insurance premiums have increased by about $1,350, or 84%, since 2000, the report finds (Dorschner, Miami Herald, 9/27).

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Consumer-Driven Health Plans
According to the report, about 4% of employees with health insurance in 2006 are enrolled in consumer-driven health plans, such as high-deductible plans that qualify for health savings accounts or health reimbursement arrangements (Snowbeck, Pittsburgh Post-Gazette, 9/27). About 60% of employees with employer-sponsored health insurance in 2006 are enrolled in PPOs and about 20% are enrolled in HMOs (Lipman, Cox/Atlanta Journal-Constitution, 9/27). The report finds that about 7% of employers that provided health insurance for employees in 2006 offered consumer-driven health plans. About 12% of employers with 1,000 or more workers that provided health insurance for employees in 2006 offered HSA-qualified plans, according to the report (Heavey, Reuters, 9/26). An estimated 2.7 million employees are enrolled in consumer-driven plans in 2006: 1.4 million are enrolled in high-deductible plans with HSAs, compared with about 800,000 in 2005, and 1.3 million are enrolled in HRAs, which statistically is the same as the 1.6 million in 2005, the report finds. According to the report, 4% of employers that provided some form of health insurance for employees but not consumer-driven health plans said they are "very likely" to offer high-deductible plans with HSAs within the next year, and 6% said they are "very likely" to offer HRAs. Annual premiums for consumer-driven health plans averaged $3,405 for single coverage and $9,484 for family coverage, and the premiums were lower than those for other forms of health insurance, the report finds. However, when contributions from employers for savings accounts are included - on average $743 for single coverage and $1,359 for family coverage - the report finds that overall spending for consumer-driven plans is similar to spending for PPOs.

Additional Results
In addition, the report finds that about 61% of employers in 2006 provided health insurance for at least some employees, a rate not statistically different from 60% in 2005 but a decrease from 69% in 2000. Almost all employers with 200 or more workers provided health insurance for employees in 2006, but fewer than 50% of employers with three to nine workers provided health coverage, the report finds (Kaiser Family Foundation/HRET/Health Affairs joint release, 9/26).

Comments
Kaiser Family Foundation President and CEO Drew Altman said, "A modest reduction in an already high rate of increase hardly looks like salvation for employers and workers who've been getting hammered by high health care costs year after year" (Fuhrmans, Wall Street Journal, 9/26). "To working people and business owners, a reduction in an already very high rate of increase just means you're still paying more," Altman said (Freking, AP/Houston Chronicle, 9/27). HRET President Mary Pittman said, "About two in five small businesses do not even offer health insurance, and those that do require workers on average to contribute significantly more to their premiums for family coverage than in prior years" (Lopes, Washington Times, 9/27). Altman said, "There is nothing to suggest" that employer-sponsored health insurance premiums "won't continue to rise at rates that exceed inflation and will probably return to double-digit levels" (Salganik, Baltimore Sun, 9/27). Altman also said the rate of employees enrolled in consumer-driven health plans indicates "that the debate in the media and in Washington health policy circles is way out in front of the reality" (Appleby, USA Today, 9/27). "You can hardly say it's an idea that has taken the employer market by storm," Altman said (Von Bergen, Philadelphia Inquirer, 9/27). Kaiser Family Foundation Vice President Gary Claxton, a co-author of the report and director of the foundation Health Care Marketplace Project, said that, because consumer-driven plans are "relatively new" and "complicated," many employers likely will "wait around and see how it works" before they offer the plans to employees (Colliver, San Francisco Chronicle, 9/27). Claxton added, "When you look at the total costs, the savings from these plans may not be enough to overcome consumer concerns about higher cost sharing" (Kaiser Family Foundation/HRET/Health Affairs joint release, 9/26). Jon Gabel, a co-author of the report and vice president of the Center for Studying Health System Change, said, "We are still losing the race between premiums and workers' earnings -- and if that trend persists, employer-based coverage will continue to decline as fewer employers and workers can afford the cost of coverage" (Karash, Kansas City Star, 9/27). Gabel added, "We are not falling off a cliff," but "we are headed down" (Yi, Los Angeles Times, 9/27).

Opinion Piece
The report is "sure to cause some new outrage" over health insurance costs, columnist David Leonhardt writes in a New York Times opinion piece. According to the report, the cost of health insurance has doubled in seven years, "while incomes and company revenue, which pay for health insurance, haven't risen nearly as much," Leonhardt writes. He adds, "Many executives have decided that they cannot afford to keep insuring their workers, and the portion of Americans without coverage has jumped 23% since 1987." Leonhardt writes that "restraining costs" is not the "solution." He writes, "Living in a society that spends a lot of money on medical care creates real problems, but it also has something in common with getting old," adding, "Would you prefer spending an extra $5,500 on health care every year - or losing 10 years off your lifespan?" The main "cause of the cost increases is still the one you can see at the hospital and in your medicine cabinet - defibrillators, chemotherapy, cholesterol drugs, neonatal care and other treatments that are both expensive and effective," Leonhardt writes. The "best way to reduce health care spending is to reduce health care itself," he writes. "It's easy to be against high costs, and it will no doubt be hard to come up with a broad health care solution," Leonhardt writes, adding, "But the way to start is by acknowledging that an affluent society should devote an ever-growing share of its resources to the health of its citizens" (Leonhardt, New York Times, 9/27).

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