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Cost-sharing skyrockets as health premiums rise

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in Employee Benefits Program,Human Resources

Employers are asking employees to shoulder a far greater share of the burden as health insurance premiums continue to rise, according to new research by the nonprofit Kaiser Family Foundation.

After several years of relatively modest increases, annual premiums for employer-sponsored family health coverage rose to $15,073 this year, up 9% from last year, according to the foundation’s 2011 Employer Health Benefits Survey.

On average, workers pay $4,129 and employers pay $10,944 toward those annual premiums. Premiums increased significantly faster than workers’ wages (2.1%) and general inflation (3.2%). Since 2001, family premiums have in­­creased 113%, compared with 34% for workers’ wages and 27% for inflation.

“This year’s 9% increase in premiums is especially painful for workers and employers struggling through a weak recovery,” Kaiser President and CEO Drew Altman says.

Employees pay more

In response to rising premiums, em­­ployers are asking employees to pay more out of pocket, a trend confirmed by a recent HR Specialist online poll (see box below).

“Health insurance is becoming less and less comprehensive,” Altman says, “and we expect that trend to continue.”

A full 50% of employees at small firms now must meet annual deductibles of $1,000 or more. Five years ago, only 16% had deductibles that high. Deductibles top $2,000 for 28% of employees at small firms.

At large firms, 22% of employees now have $1,000 deductibles, up from 6% in 2006.

Co-pays are up, too. In 2006, 50% of insured employees had co-pays of $20 or less for a visit to a primary care physician.

This year, only 23% do. Most—58%—have co-pays between $20 and $30 per visit.

Effects of health care reform

In addition to health insurance cost trends, the Kaiser survey looked at how several already-implemented provisions of the Affordable Care Act (ACA) health reform law have affected employer coverage.

The survey estimates that employers added 2.3 million young adults to their parents’ family health insurance policies as a result of the health reform provision that allows young adults up to age 26 without employer coverage of their own to be covered as dependents on their parents’ plan. Young adults historically are more likely to be uninsured than any other age group.

Kaiser found that 56% of covered workers are in “grandfathered” plans as defined under the ACA. Grandfathered plans are exempted from some health reform requirements, including covering preventive benefits with no cost-sharing. To obtain this status, employers cannot make significant changes to their plans that reduce benefits or increase employee cost.

One in four covered workers (23%) are in plans that changed their cost-sharing requirements for preventive services as a result of an ACA requirement that nongrandfathered plans provide certain preventive benefits without cost-sharing.

Other Kaiser findings

•    Employers offering insurance benefits: Sixty percent of employers offer health insurance to workers, comparable to the levels in 2009 and earlier years.

•    Worker-only coverage: Premiums for worker-only health coverage in­­creased 8% in 2011 to reach $5,429 annually. Workers on average pay $921 toward this coverage.

•    Cost-sharing for office visits: Cov­­ered workers facing co-payments for in-network physician office visits on average pay $32 for specialty care.

•    Prescription co-pays: Covered workers had average co-pays of $10 for generic drugs, $29 for preferred brand-name drugs, $49 for nonpreferred brand-name drugs and $91 for specialty drugs.

•    HSAs and HRAs: Over the past two years, more employers have started to offer high-deductible plans that include a tax-preferred savings options, such as a Health Savings Accounts or Health Reimbursement Arrangements. The share of covered workers enrolled in this type of plan has doubled, from 8% in 2009 to 17% in 2011. Plans that can be used with a Health Savings Account have lower premiums than other plan types, but must have annual deductibles of at least $1,200 for an individual and $2,400 for a family this year.

•    Retiree health benefits: Among large firms (those with 200 or more employees), 26% currently offer retiree health benefits, unchanged from last year—but down significantly from 32% in 2007.

Full survey results are available online at ehbs.kff.org.

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